Wednesday, January 26, 2022

Major student loan processor cancels $1.7 billion debt

Navient, one of the nation’s largest student loan processors, will write off $1.7 billion of debt for 66,000 students following a lawsuit settlement agreement with 39 states and the District of Columbia.

“Navient has repeatedly and deliberately put profits ahead of its borrowers – it has resorted to deceptive and abusive methods, targeted students it knew would have a hard time repaying loans, and placed an unfair burden on people trying to improve their lives through education.” – said in Pennsylvania. Attorney General Josh Shapiro, Democrat and one of the attorney generals suing the company.

The $1.7 billion in debt written off is solely for private student loans, which are not guaranteed by the federal government. Navient will also pay $95 million in restitution to 350,000 federal student loan borrowers who have been enrolled in certain long-term abstinence programs.

Navient pleaded not guilty to the settlement and maintains that it did nothing illegal. The company has long managed federal student loans on behalf of the Department of Education, although it is moving those responsibilities to other service personnel in 2022.

The lawsuits against Navient began five years ago and focused on allegations that Sallie Mae, Navient’s predecessor, made loans to borrowers it knew might be in default, as well as allegations that Navient nudged borrowers into expensive indulgence programs instead of cheaper income-based repayment options. .

Most canceled loans are “subprime loans” given to students attending for-profit colleges, whose graduation rates were often below 50%. This made it unlikely that the students would ever be able to repay the loans.

The federal court still has to approve the settlement. Borrowers who qualify for assistance simply need to make sure the Department of Education has up-to-date addresses for them, Shapiro’s office said, and should be notified if they receive assistance in the spring or early summer.

Another lawsuit against Navient, filed by the federal Consumer Financial Protection Bureau, is still pending. The lawsuit alleges that Navient deceived borrowers into paying more than necessary.

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