Pennsylvania’s Attorney General Josh Shapiro announced Thursday that Navient, one of the country’s largest education loan management companies, will cancel $1.7 billion in private student loan debt to resolve allegations of deceptive servicing practices.
Navient announced plans in September to leave the federal student loan servicing industry, and the company had been probed by 39 state attorneys general for “allegations of widespread unfair, deceptive, and abusive student loan servicing practices and abuses in originating predatory student loans,” according to a statement released by Shapiro’s office.
Nearly 66,000 private student loan borrowers across the U.S. will benefit from Navient’s cancellations as a result of the settlement, which totals $1.85 billion.
“Navient repeatedly and deliberately put profits ahead of its borrowers—it engaged in deceptive and abusive practices, targeted students who it knew would struggle to pay loans back, and placed an unfair burden on people trying to improve their lives through education,” Shapiro said in the statement.
Navient denies the allegations and calls the claims “unfounded.” Mark Heleen, Navient’s chief legal officer, said in a statement on Thursday that the company “is and has been continually focused on helping student loan borrowers understand and select the right payment options to fit their needs.”
“The company’s decision to resolve these matters, which were based on unfounded claims, allows us to avoid the additional burden, expense, time, and distraction to prevail in court,” Heleen added.
According to Navient, the company will cancel the debt of borrowers who originated loans “largely between 2002 and 2010 and later defaulted and charged off.”
These borrowers were deceived by two “schemes,” according to Shapiro: Navient issued subprime private loans to borrowers who the company knew wouldn’t be able to afford paying them back, and Navient allegedly drove borrowers into forbearance, which stopped them from paying down their principal loan balance, leading many borrowers to “accumulate more debt and never-ending interest payments,” Shapiro said in a statement.
After the company receives final court approvals, it will notify borrowers who will have their private debt canceled.
Another $95 million of the settlement money will be used to make restitution payments of about $260 each to approximately 350,000 federal student loan borrowers who were put into long-term forbearances, according to the attorney general’s office.
Navient will notify the 66,000 private student loan borrowers by July 2022, and eligible borrowers will receive refunds on any payments that were made on canceled private loans after June 30, 2021. Qualifying borrowers don’t need to do anything to have their private debt canceled.
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