Thousands of state’s student loan borrowers to get cash payments
Thousands of Connecticut student loan borrowers will receive cash payments as part of a $1.85 billion settlement the state has reached with Navient.
In a joint statement with Consumer Protection Commissioner Michelle H. Seagull and Banking Commissioner Jorge Perez, state Attorney General William Tong’s office said Thursday the settlement was part of a coalition with 39 attorneys general, who allege the company engaged in “unfair and deceptive” student loan practices.
“States claimed that since 2009, despite vowing to help borrowers find the best repayment options for them, Navient steered struggling student loan borrowers into costly longterm forbearances and away from more affordable income-driven repayment plans,” the statement said.
In a statement, Mark Heleen, Navient’s chief legal officer, said the claims were unfounded and the company agreed to the settlement “to avoid the additional burden, expense, time and distraction to prevail in court.”
“Navient is and has been continually focused on helping student loan borrowers understand and select the right payment options to fit their needs,” his statement said. “In fact, we’ve driven up incomedriven repayment plan enrollment and driven down default rates, and every year, hundreds of thousands of borrowers we support successfully pay off their student loans.”
Connecticut officials said 1,339 borrowers in the state will receive $19 million in private loan debt relief, while another 4,875 borrowers will receive almost $1.3 million in restitution. The state will also receive more than $141,000 from the settlement, which will be placed in the general fund.
“This settlement will send millions of dollars directly to thousands of Connecticut borrowers who were deceived by Navient’s abusive practices,” Tong said in a statement, calling the settlement a “massive victory for borrowers.”
But the attorney general said the billions of dollars in student loans owed by Connecticut families remains an “insurmountable barrier” for many, and pledged to continue working on the “financial crisis” brought about by the debt.
Tong’s office said he filed the settlement as a proposed stipulated judgment and complaint in state Superior Court on Thursday. It will require the court’s approval.
The states alleged that Navient pushed borrowers to forbearance options, where loan payments are temporarily paused or reduced, rather than income-based repayment plans. That meant that borrowers saw interest add up on their loan balances, rather than obtaining forgiveness, interest subsidies or low payment options.