URGENT UPDATE JAN 17, 2022: NAVIENT HAS AGREED TO PROVIDE $1.7bn TO BORROWERS IN A SETTLEMENT OF A RANGE OF LAWSUITS
More than 400,000 student loan holders will have their debts canceled or receive debt relief after the student loan servicing company was forced to reached a settlement with borrowers.
Navient’s move to settle came in response to lawsuits lodged by a coalition of state attorneys general who accused the company of exploiting borrowers and forcing them into illegitimate charges and interest payments.
The coalition included attorneys general from Pennsylvania, California and a range of other states who have been pursuing the student loans giant, previously known as Sallie Mae, over alleged predatory lending practices that have impacted on hundreds of thousands of borrowers.
Navient lawsuit student loans forebearance settlement
The lawsuits date back to 2017 and had been winding their way through the courts before the settlement was announced in mid January.
The agreement, which will have to be approved by a judge before it is finalised, cancels $1.7 billion in private loan debt owed by more than 66,000 borrowers and provides $95 million in restitution payments to approximately 350,000 federal loan borrowers who were placed on specific types of long-term forebearance against any form of common sense financial advice.
“The predatory practices used by Navient exploited students who wanted nothing more than an education. The company placed borrowers in risky subprime loans, causing them to incur debts they could never repay,” said Michigan attorney general Dana Nessel, one of the attorneys general who sued Navient, in a statement on Thursday. “This settlement reflects accountability for affected borrowers across the country.”
Pennsylvania Attorney General Josh Shapiro said in an interview.: This settlement not only holds [Navient] accountable but brings real relief to hundreds of thousands of Americans who are struggling to pay their student loans. We’re going to hold the powerful institutions in this country accountable when they take advantage of people.”
Navient state lawsuit settlement
The attorneys general’s lawsuit accused Navient of encouraging students to enter into costly forbearances instead of directing them to better repayment plans to pay off their loans. Borrowers who enrolled in forbearances between January 2010 and March 2015 accumulated more than $4bn in interest after the forbearance plans saw accrued interest being added on to existing loan balances, according to the lawsuits.
The bulk of the loans in question were serviced by the student loan company Sallie Mae, the loan servicing operations of which ultimately in 2014 branched off into Navient, which absorbed the liabilities of most of the assets tied to Sallie Mae’s loan servicing arm.
As explained by Nerd Wallet, Navient was, at one time, the largest student loan servicer through its parent company Sallie Mae. Navient ended its federal student loan servicing contract after December 2021 and its portfolio was transferred to Aidvantage. Navient continues to service privately held FFEL program debt and provide private student loans.
Despite the settlement, Navient denied any wrongdoing and said it had opted for a settlement in lieu of paying the cost of resolving each individual lawsuit.
“This is really about eliminating a time-consuming, distracting and costly process,” Navient’s CEO, Jack Remondi, told journalists. “With the ability to explicitly deny the claims that were made in these cases and borrower harm, I think it’s noteworthy that we’re not giving up on our defense here. We’re just agreeing that it’s time to move on.”
Navient’s full public response can be found here: https://news.navient.com/news-releases/news-release-details/navient-announces-successful-resolution-legal-matters-state
“In the agreements, Navient expressly denies violating any law, including consumer-protection laws, or causing borrower harm. Navient also has agreed to maintain servicing practices that support borrower success,” the company said.
Navient Lawsuit Settlement FAQs
Am I eligible for debt cancellation in this Navient settlement?
The loans in question were taken out primarily between 2002 to 2014. These private loans often came with a variable, rather than fixed, interest rate and a shorter window than federal student loans to make payments before the loans were declared to be in default.
The attorney’s argued that many borrowers who were struggling to make payments were not told about a federal “income driven” program that could lower their payments. Others were not told about a federal program that forgives some debt for public-sector workers.
According to Navient, states with borrowers potentially eligible for relief include Arizona, Arkansas, California, Colorado, Connecticut, Delaware, District of Columbia, Florida, Georgia, Hawaii, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Nebraska, Nevada, New Jersey, New Mexico, New York, North Carolina, Ohio, Oregon, Pennsylvania, Rhode Island, South Carolina, Tennessee, Virginia, Vermont, Washington, West Virginia, Wisconsin.
“Qualifying federal loan borrowers who were residents of one of the following states or had an address with a military postal code as of January 2017 will be issued a check in the amount of approximately $260,” Navient said.
“The agreement includes loan cancelation for approximately 66,000 borrowers who took out private student loans at Sallie Mae, largely between 2002 and 2010 and who subsequently defaulted. The vast majority of recipients borrowed prior to 2010 to attend certain for-profit schools, such as Corinthian and ITT, which closed years later once the federal government stopped lending at these schools. The total amount that will be canceled is approximately $1.7 billion in defaulted private education loans. Navient had already charged off virtually all of these loan balances, and has taken a $50 million charge for the remaining amount. Once court approval is received, borrowers and co-borrowers whose loans will be canceled will be contacted by Navient. Borrowers and co-borrowers do not need to take any action.
Are there other lawsuits against Navient still going?
Yes, a whole range of lawsuits against are still active, including the suit lodged by the Consumer Financial Protection Bureau.
How do I find out if I qualify for debt cancellation or compensation?
Navient says it will be contacting borrowers who will receive loan cancellation following authorization of the settlement agreement in federal court. Borrowers eligible for a settlement payment will receive a postcard in the mail in the spring, according to Navient.
How to join the Navient student loan cancellation settlement
Once court approval is received, borrowers and co-borrowers whose loans will be canceled will be contacted by Navient. Borrowers and co-borrowers do not need to take any action.
How much could I get in the Navient settlement?
According to AP, in Massachusetts and Pennsylvania the average debt being canceled is around $27,000. In Washington state, it’s about $25,000.
When will Navient cancel my debts or provide compensation?
Borrowers who will see their private loan debt canceled will be notified by Navient by July 2022, along with a refund of payments they made on the loan after June 30, 2021, according to state officials. Private loan borrowers don’t need to take any action to qualify, AP has reported.
Borrowers who are eligible for a restitution payment of approximately $260 will receive a postcard from the settlement administrator this spring, state officials say. Checks are expected to go out in mid-2022.
