Student loan giant Navient settles claims of predatory lending practices with 39 states for $ 1.85 billion – CBS Philly

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(AP) – Navient, a major student loan services company, settled allegations of deceptive lending practices for $ 1.85 billion, officials said Thursday, announcing a settlement that would cancel student loans in the tens of thousands borrowers.

The settlement includes $ 1.7 billion in debt cancellation and $ 95 million in restitution and involves 39 state attorneys general. It resolves allegations that Navient drove student borrowers into long-term forbearances instead of giving them advice on cheaper repayment plans, according to Pennsylvania Attorney General Josh Shapiro, who co-led the litigation and negotiation of settlement with the states of Washington, Illinois. , Massachusetts and California.

Today, I am here to announce that Navient has taken responsibility for its actions.

And will pay.

PA borrowers will receive more than $ 70 million in life-changing aid.

– AG Josh Shapiro (@PAAttorneyGen) January 13, 2022

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“Navient has repeatedly and deliberately put profits ahead of his borrowers – he engaged in deceptive and abusive practices, targeted students he knew would have difficulty repaying their loans, and imposed a burden unfair to people trying to improve their lives through education, ”Shapiro said. in a report.

Settlement will require court approval.

Under the terms of the deal, Navient will write off more than $ 1.7 billion in subprime private student loans owed by more than 66,000 borrowers across the country, Shapiro said. Navient will also pay a total of $ 142.5 million, of which $ 95 million will be distributed to approximately 350,000 federal loan borrowers who have been subject to some type of long-term forbearance.

Shapiro said the subprime loans were made “to borrowers whom they knew they couldn’t pay back the money,” a situation similar to the mortgage crisis of 2008. Additionally, he said, Navient “misled borrowers into abstentions… and led many to accumulate more debt and pay endless interest.”

Forbearance refers to when a lender allows a borrower to suspend or reduce their payments for a limited time while they are rebuilding their finances. However, the interest on the loan continues to accrue and could potentially result in an increase in the amount to be repaid over the term of the loan.

Navient said he had not acted illegally and admitted no fault in the regulations.

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“Navient is and always has been focused on helping student loan borrowers understand and select the right payment options to meet their needs. In fact, we’ve increased enrollment in an income-based repayment plan and reduced default rates, and every year hundreds of thousands of borrowers we support successfully repay their student loans, ”said Mark Heleen , legal director of Navient, in a press release.

The regulation requires Navient to explain the benefits of income-based repayment plans and to offer to estimate income-based payment amounts before placing borrowers in voluntary forbearances.

Navient is also to train specialists who will advise distressed borrowers on alternative repayment options and advise public service workers on public service loan forgiveness and related programs.

Following the settlement, consumers with private loan cancellation will receive notification from Navient along with refunds of any payments made on canceled loans after June 30, 2021.

“Today’s settlement requires Navient to correct its mistakes … and is an important step towards resolving our failed student loan repayment system,” Massachusetts Attorney General Maura Healey said in a statement. press conference.

The regulation also requires Navient to notify borrowers of the recently announced PSLF limited waiver option by the US Department of Education, which temporarily offers millions of eligible public servants the opportunity to have previously ineligible repayment periods taken. into account for the cancellation of the loan on condition that they are consolidated in the direct loan. Schedule and file employment certifications by October 31, 2022.

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(© Copyright 2021 by The Associated Press. All rights reserved.)

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