Attorney General Jeff Landry announced that Navient, known as one of the largest student loan servicers in the nation, will provide financial relief to resolve allegations of widespread unfair and deceptive student loan servicing practices and abuse in the granting of predatory student loans.
The settlement, joined by Attorney General Landry and 38 other attorneys general, resolves allegations that since 2009 — despite saying it would help borrowers find the best repayment options for them — Navient has steered struggling student borrowers to costly long-term forbearances instead of counseling. educate them on the benefits of more affordable income-driven repayment plans.
“Through unfair and deceptive practices, Navient has drowned many of our neighbors in debt,” Attorney General Landry said. “I am proud to not only provide relief to Louisiana borrowers, but to establish protections to prevent Navient from preying on students in the future.”
Attorney General Landry today filed the settlement as a proposed judgment and consent complaint in the 19th Judicial District Court. The settlement will require court approval.
According to the attorneys general, interest accrued due to Navient’s forbearance practices was added to borrowers’ loan balances, pushing borrowers further into debt. If the company had instead provided borrowers with the help it promised, income-driven repayment plans could have potentially reduced payments to as little as $0 per month, offered interest rate subsidies and/or help obtain cancellation of any remaining balance after 20-25 years of qualifying payments (or 10 years for qualified borrowers under the Civil Service Loan Forgiveness Scheme).
Navient also allegedly created predatory private loans at risk to students attending for-profit schools and colleges with low graduation rates, even though it knew a very high percentage of those borrowers would be unable to repay the loans. Navient reportedly made these risky subprime loans as “an incentive to get schools to use Navient as a preferred lender” for highly profitable “prime” federal and private loans, with no regard for borrowers and their families, many of whom were without the namely trapped in debts they could never repay.
Under the terms of the settlement, Navient will forgive the remaining balance on nearly $1.7 billion in subprime private student loan balances owed by nearly 66,000 borrowers nationwide. Additionally, Navient will pay $142.5 million to the attorneys general. A total of $95 million in restitution payments of about $260 each will be distributed to about 350,000 federal borrowers who have been placed in some type of long-term forbearance. Borrowers who will receive debt restitution or forgiveness span all generations: Navient’s harmful conduct has affected everyone, from students who enrolled in colleges and universities immediately after high school to mid-career students who dropped out after enrolling in an early-to-middle for-profit school. -2000s.
As part of the settlement, Louisiana will receive a total of $3,600,563 in restitution payments for more than 13,000 federal borrowers. Additionally, 1,178 borrowers will receive a total of $23,736,065 in private loan debt forgiveness.
The settlement includes conduct reforms that require Navient to explain the benefits of income-tested repayment plans and to offer to estimate income-tested payment amounts before placing borrowers in optional forbearances. Additionally, Navient is to train specialists who will advise distressed borrowers on alternative repayment options and advise public service workers on Public Service Loan Forgiveness (PSLF) and related programs. The conduct reforms imposed by the regulations include prohibitions on compensating customer service agents in a way that incentivizes them to minimize the time spent advising borrowers.
The settlement also requires Navient to notify borrowers of the U.S. Department of Education’s recent announcement Possibility of limited derogation PSLF, which temporarily offers millions of eligible public servants the opportunity to benefit from previously ineligible repayment periods counted for loan cancellation, provided they consolidate into the direct loan program and file certifications of employment before October 31, 2022.
As a result of today’s settlement, borrowers with Private Loan Debt Cancellation will receive notice from Navient by July 2022, along with reimbursement of any payments made on Private Loans canceled after 30 June 2021. Federal borrowers eligible for a restitution payment of approximately $260 will receive a postcard in the mail from the Settlement Administrator later this spring.
Federal borrowers who qualify for relief under this settlement do not need to take any action other than updating or creating their studentaid.gov account to ensure that the US Department of Education has its current address. For more information, visit www.NavientAGSettlement.com.
Until recently, Navient had a federal student loan administration contract owned by the US Department of Education, including a large portfolio of loans issued under the Direct Lending Program and a smaller portfolio of loans issued under the under the Federal Family Education Loans (FFEL) program. On October 20, 2021, the U.S. Department of Education announced the transfer of this contract from Navient to Aidvantage, a division of Maximus Federal Services, Inc. However, Navient will continue to service federal student loans issued under the FFEL program that belong to private lenders, as well as non-federal private student loans.
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