Navient settlement to affect 5K Wisconsin borrowers
One of the nation’s largest student loan servicers, Navient, will provide $1.85 billion in relief to settle allegations that it engaged in deceptive loan servicing practices that pushed borrowers into more debt.
Navient will cancel nearly $1.7 billion in subprime private student loans owed by some 66,000 borrowers nationwide, in addition to paying $95 million in restitution payments to borrowers who were placed in certain types of longterm forbearances.
The claims were made by a coalition of 39 attorney’s general including Wisconsin Attorney General Josh Kaul.
Kaul said Thursday that the state would receive $1.1 million in restitution payments for more than 4,165 federal loan borrowers in addition to $22.8 million in private loan cancellation for 953 borrowers under the settlement.
“A student loan servicer cannot be permitted to engage in deceptive and predatory practices that add to the burdens that families face because of student loan debt,” Kaul said. “This resolution provides meaningful relief to many people who were impacted by Navient’s actions.”
The attorneys general argued that since 2009, Navient failed to help borrowers find the best repayment option for them, steering them into loan forbearance instead of income-based repayment plans. That led borrowers to be driven further into debt as the interest they accrued was added onto their principal balances.
Forbearance allows borrowers to pause or reduce their debt payments for a short time period while still accruing interest. Income-based repayment plans set monthly payments — as low as $0 per month — depending on how much the borrower earns. Under those plans the borrowers could also have been provided interest subsidies, and/ or been able to apply to have their loans forgiven after 20-25 years of qualifying payments, Kaul’s office wrote.
The settlement requires that Navient reform its practices by explaining the benefits of income-based repayment plans and offering to estimate what payments under those plans would look like before putting borrowers into forbearance. The loan servicer will also have to train specialists who can advise distressed borrowers about their repayment options, tell public service workers about the Public Service Loan Forgiveness Program (which forgives loans for qualified borrowers after 10 years) and other programs.
Navient said it did not act illegally, and it did not admit any fault in the settlement.
“Navient is and has been continually focused on helping student loan borrowers understand and select the right payment options to fit their needs,” Navient Chief Legal Officer Mark Heleen said in a statement. “In fact, we’ve driven up income-driven repayment plan enrollment and driven down default rates, and every year, hundreds of thousands of borrowers we support successfully pay off their student loans.”
Borrowers who will receive private loan cancellation will get a notice from Navient by July along with refunds of any payments made on the cancelled private loans after June 30.
Borrowers who are eligible for restitution payments — approximately $260 each — for federal loans will get a postcard from the settlement administrator in the spring. They do not have to take any action beyond updating or creating their account at studentaid.gov, where they should make sure their address is up to date.
“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,” said Pennsylvania Attorney General Josh Shapiro, who co-led the litigation and negotiation of the settlement.
The settlement will require court approval. For more information, visit www.NavientAGSettlement.com.