a chief a settlement The announcement was made Thursday to resolve a long-running lawsuit by 39 state attorneys general against Navient, one of the nation’s largest student loan companies.
The lawsuit claims Navient engaged in unfair and deceptive practices by pushing student loan borrowers into forbearance and away from important federal student loan relief programs such as income-driven repayment plans and Public Service Loan Forgiveness (PSLF). Forbearance can be harmful to borrowers because interest accrues on their student loans during the period of the deferred payment; That accrued interest can then be capitalized – added back to the loan principal – having a compounding effect and leading to runaway balance growth. Forgiveness does not count for loan waiver terms, such as the 25-year repayment period for income-based repayment (IBR) or the 10-year public service employment required for borrowers on track for the PSLF program.
The Federal Consumer Financial Protection Bureau (CFPB), in a separate lawsuit against Navient brought in in 2017, also alleged that Navient engaged in forbearance-operating practices that resulted in financial losses to borrowers.
According to the lawsuit from the state attorney general, Navient allegedly originated subprime private student loans for borrowers attending several predatory for-profit schools. The lawsuit suggested that Navient issued these high-interest private student loans to students where it knew, or should have known, to repay those loans in light of the schools’ low graduation rates and dim career prospects. It will be difficult for them.
The terms of settlement will include the following:
- $1.7 billion in private student loan cancellations for borrowers participating in some for-profit institutions, such as ITT technical institutions and arts institutions.
- Navient will pay $95 million in restitution payments to approximately 350,000 federal student loan borrowers who were placed in some form of long-term forbearance. This would amount to approximately $260 per borrower.
- Navient will also need to improve communication with borrowers about federal student loan programs such as income-driven repayment and Public Service loan forgiveness, and remove incentives for customer service representatives to prematurely end phone calls with borrowers. .
As part of the Agreement, Navient accepts no misconduct, and in accordance with the Terms, nothing in the Settlement Provisions will “take or be construed as an admission of or concession of any breach of law, rule, regulation, other fact or law, or a case of any liability or wrongdoing. [the settlement agreement]… shall constitute evidence of any liability, mistake, or wrongdoing” by the Navient.” Navient strongly denies that it engaged in misconduct or harmed student loan borrowers.
Navient repeatedly and deliberately puts profits ahead of its borrowers – it engages in deceptive and abusive practices, targets students who know they will struggle to pay back loans, and seeks to improve their lives through education. put an undue burden on those trying,” Pennsylvania said. Attorney General Shapiro, who led the trial, said in a statement. “Today’s agreement corrects Navient’s past behavior, provides much-needed relief to Pennsylvania borrowers, and puts in place safeguards to ensure that this company does not fall victim to student loan borrowers again.”
Student loan borrower advocacy groups praised the agreement. Mike Pierce, executive director of the Student Borrower Protection Center, said, “Ultimately, student loan borrowers who were forced to bear the burden of dangerous and predatory private student loans made by Sally Mae and owned by Navient, eventually Debt free.” Statement. “Today’s action is a clear victory for many of the millions of borrowers whose pain Navient and Sally Mae shamelessly turned into profit.”
According to the Pennsylvania Attorney General Shapiro’s office, “federal loan borrowers who qualify for relief under this agreement are not required to take any action other than update or make their own studentaid.gov This account is to ensure the U.S. Department of Education has their current address.” Private loan borrowers also don’t need to take any action to qualify for the relief, which will be granted automatically by July. For more details, borrowers can visit www.NavientAGSettlement.com,
case, captioned Commonwealth of Pennsylvania by Attorney General Josh Shapiro v Navient Corporation and Navient Solutions, LLC, was filed in the US District Court for the Central District of Pennsylvania. The settlement was led by the state attorney general offices of Pennsylvania, Washington, Illinois, Massachusetts and California, and was joined by attorneys general in dozens of other states led by both Democrats and Republicans.
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