Student-Loan Processor Navient to Cancel $1.7 Billion of Debts

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Private loan waiver agreement for 66,000 borrowers resolves state lawsuits against company

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“The company’s decision to resolve these cases, which were based on unfounded claims, allows us to avoid additional burden, expense, time and distraction in court,” said Mark Helen, Navient’s chief legal officer.

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All loans forgiven in the agreement were in default, and most originated in Sally Mae between 2002 and 2010.,

Before the Navient spinoff.

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Navient has faced several lawsuits in recent years alleging that the company engaged in unfair and deceptive conduct against borrowers. Last March, a Seattle-area judge ruled that the company had broken consumer protection law in a case brought by the Washington attorney general.

Navient repeatedly and deliberately puts profits ahead of its borrowers – it engages in deceptive and abusive practices, targeted students who knew they would struggle to pay back loans, and made their lives through education. put an undue burden on people trying to improve,” Pennsylvania Attorney General Josh Shapiro said.

In addition to loan cancellations and some restitution for borrowers with private loans, Navient will pay $95 million to about 350,000 federal loan borrowers — or about $260 each — who were placed in some sort of forbearance program, allowing them to Had to accumulate more loans instead of entering into income-based repayment scheme, the states said.

States will distribute compensation to borrowers in their jurisdiction. Massachusetts, for example, will receive more than $6 million, including $2.2 million in restitution for more than 8,300 federal loan borrowers, state Attorney General Maura Healy said.

As part of the settlement, Navient continues to deny claims or damages the company has caused to any borrowers.

Private loans without federal support make up less than 10% of the total $1.7 trillion student loan industry. Data from the Department of Education shows that about 43 million people owe $1.6 trillion in federal student loans. About 5.2 million of those federal borrowers are in default. Those borrowers, unless they also hold private student loans, are not affected by Thursday’s settlement.

Navient is in the midst of pulling out of federal student loan processing. It has been one of the primary federal contractors serving approximately six million borrowers. Its accounts are being transferred to Maximus, a new contractor whose role was approved by the Department of Education.

The Biden administration is in the midst of restructuring its student-loan processing system. In November it announced that it was terminating its relationship with private collection agencies, which were tasked with recovering payments from defaulted federal student-loan borrowers, in order to improve collections and provide more support to borrowers. Was.

Last February, borrowers petitioned a bankruptcy court in New York to force Navient’s loan processing unit into bankruptcy, alleging that the company improperly collected debt they didn’t owe. The company dismissed the claims as frivolous and a judge dismissed the case.

The Consumer Financial Protection Bureau has been accusing Navient since 2017 of prompting borrowers to postpone payments instead of entering into low-cost, income-driven repayment plans. The CFPB has said that the exercise cost borrowers $4 billion in interest expense. Navient has rubbished the government’s claims.

Write Gabriel T. Rubin at [email protected]

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