Ga. joins $1.85B national student loan settlement

Attorney General Chris Carr today announced that the State of Georgia has joined 38 states in reaching a $1.85 billion nationwide settlement with Navient, one of the nation’s largest student loan servicers.

“For years, Georgians who turned to Navient for help with repaying their student loans saw their debt worsen rather than improve due to the company’s deceptive practices,” said Carr. “By reaching this settlement, Georgia borrowers will receive much-needed relief totaling more than $118 million as they work to regain their financial footing. We are proud of this announcement and hope it serves as a reminder that we will pursue servicers that unfairly take advantage of those struggling with student loan debt.”

This settlement resolves claims that since 2009, Navient steered struggling student loan borrowers into costly longterm forbearances instead of counseling them about the benefits of more affordable income-driven repayment plans. This, despite Navient representing that it would help borrowers find the best repayment options for them.

Carr filed the settlement on Jan. 13. The settlement will require court approval.

The attorneys general allege that:

The interest that accrued because of Navient’s forbearance steering practices was added to the borrowers’ loan balances, pushing borrowers further into debt. Had the company instead provided borrowers with the help it promised, borrowers could have benefited from income-driven repayment plans, interest subsidies, and/or help attaining forgiveness of any remaining balance after a proscribed number of years of qualifying payments; and

Navient originated predatory subprime private loans to students attending forprofit schools and colleges with low graduation rates, even though it knew that a very high percentage of such borrowers would be unable to repay the loans; and

Navient made these risky subprime loans as “an inducement to get schools to use Navient as a preferred lender” for highly-profitable federal and “prime” private loans.

The settlement requires Navient to:

Cancel the remaining balance on more than $1.7 billion in subprime private student loan balances owed by more than 66,000 borrowers nationwide; and

Pay $142.5 million to the attorneys general; and

Pay a total of $95 million in restitution payments to approximately 350,000 federal loan borrowers who were placed in certain types of long-term forbearances; and

Pay restitution to the States, including over $5.9 million for 22,468 Georgia federal loan borrowers; and

Cancel over $113 million in private loan debt owed by 4,268 Georgia borrowers; and

Implement conduct reforms that require Navient to:

Explain the benefits of income-driven repayment plans and to offer to estimate incomedriven payment amounts before placing borrowers into optional forbearances; and

Train specialists who will advise distressed borrowers concerning alternative repayment options and counsel public service workers concerning Public Service Loan Forgiveness and related programs; and

Refrain from compensating customer service agents in a manner that incentivizes them to minimize time spent counseling borrowers; and

Notify borrowers about the U.S. Department of Education’s recently announced PSLF limited waiver opportunity.