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Attorney General Ford Announces $1.7 Billion Settlement with Student Loan Servicer Navient

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Settlement includes $1.6 billion in debt cancellation and $95 million in restitution; Nevada borrowers will receive over $18 million in relief. 

Carson City, NV – Attorney General Aaron D. Ford has announced that Navient, one of the nation’s largest student loan servicers, will provide relief totaling $1.7 billion to resolve allegations of widespread unfair and deceptive student loan servicing practices and abuses in originating predatory student loans. 

This settlement resolves claims from 2009 onward that Navient steered struggling student loan borrowers into costly long-term forbearances instead of counseling them about the benefits of more affordable income-driven repayment plans, despite representing that it would help borrowers find the best repayment options for them. 

“This settlement provides relief to thousands of Nevada students who were victims to Navient’s misrepresentations and predatory practices,” said AG Ford. “This settlement also serves as a caution to other loan servicers that these practices will not be tolerated, and it is their responsibility to assist borrowers in an honest and professional manner.” 

According to the attorneys general, the interest that accrued because of Navient’s forbearance steering practices was added to the borrowers’ loan balances, pushing borrowers further in debt. Had the company provided borrowers with the help it promised, income-driven repayment plans could have potentially reduced payments for those borrowers to as low as $0 per month, provided interest subsidies and/or helped attain forgiveness of any remaining balance after 20-25 years of qualifying payments (or 10 years for borrowers qualified under the Public Service Loan Forgiveness Program). 

Navient also allegedly originated predatory subprime private loans to students attending for-profit schools and colleges with low graduation rates, even though it knew that a very high percentage of such borrowers would be unable to repay the loans. Navient allegedly made these risky subprime loans as “an inducement to get schools to use Navient as a preferred lender” for highly-profitable federal and “prime” private loans, without regard for borrowers and their families, many of whom were unknowingly ensnared in debts they could never repay. 

Under the terms of the settlement, Navient will cancel the remaining balance on more than $1.6 billion in subprime private student loan balances owed by approximately 62,000 borrowers nationwide. In addition, a total of $95 million in restitution payments of about $260 each will be distributed to approximately 350,000 federal loan borrowers who were placed in certain types of long-term forbearances. Borrowers who will receive restitution or debt cancellation span all generations: Navient’s harmful conduct impacted everyone from students who enrolled in colleges and universities immediately after high school to mid-career students who dropped out after enrolling in a for-profit school in the early to mid-2000s. 

  

As part of the settlement, Nevada will receive a total of $1,053,752 in restitution payments for 3,952 federal loan borrowers. Additionally, 592 Nevada borrowers will receive a total of $17,140,858 in private loan debt cancellation. 

The settlement also includes requirements that require Navient correct and maintain its conduct in the future. These include requirements that Navient explain the benefits of income-driven repayment plans and to offer to estimate income-driven payment amounts before placing borrowers into optional forbearances, and train specialists who will advise distressed borrowers concerning alternative repayment options and counsel public service workers concerning Public Service Loan Forgiveness (PSLF) and related programs. The conduct reforms imposed by the settlement also include prohibitions on compensating customer service agents in a manner that incentivizes them to minimize time spent counseling borrowers. 

The settlement also requires Navient to notify borrowers about the U.S. Department of Education’s recently announced PSLF limited waiver opportunity, which temporarily offers millions of qualifying public service workers the chance to have previously non-qualifying repayment periods counted toward loan forgiveness — provided that they consolidate into the Direct Loan Program and file employment certifications by Oct. 31, 2022. 

As a result of today’s settlement, borrowers receiving private loan debt cancellation will receive a notice from Navient, along with refunds of any payments made on the cancelled private loans after June 30, 2021. Federal loan borrowers who are eligible for a restitution payment of approximately $260 will receive a postcard in the mail from the settlement administrator later this spring. 

Federal loan borrowers who qualify for relief under this settlement do not need to take any action except update or create their studentaid.gov account to ensure U.S. Department of Education has their current address. For more information, visit NavientAGSettlement.com. 

Today’s settlement was led by Pennsylvania, Washington, Illinois, Massachusetts, and California, and was joined by attorneys general in Arizona, Arkansas, Colorado, Connecticut, Delaware, Florida, Georgia, Hawaii, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Michigan, Minnesota, Missouri, Nebraska, New Jersey, New Mexico, New York, North Carolina, Ohio, Oregon, Rhode Island, South Carolina, Tennessee, Virginia, West Virginia, Wisconsin and the District of Columbia. 

The proposed consent judgment and complaint are attached. 

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