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Settlement Provides $1.85 Billion In Nationwide Relief To Students Who Got Loans From Navient

Consumers do not need to take any action to receive the benefits required under the settlement.
Consumers do not need to take any action to receive the benefits required under the settlement. Photo Credit: Green Chameleon on Unsplash

One of the nation’s largest student loan servicers has agreed to relieve $1.85 billion in loan debt to help settle a blockbuster lawsuit filed by 38 states and the District of Columbia, authorities announced Thursday.

Under the terms of the settlement, Navient Corp and its subsidiary Navient Solutions LLC will make restitution payments of roughly $260 each to 350,000 borrowers, Acting New Jersey Attorney General Andrew J. Bruck said.

It will also cancel more than $1.7 billion in subprime private student loans owed by 66,000 or so borrowers nationwide, he said.

The settlement includes approximately $57.2 million in debt relief to 2,040 New Jersey borrowers and $3.1 million in restitution payments to 11,522 other Garden State residents, Bruck said. The state itself will also receive $3 million, he said.

The borrowers who will receive restitution or forgiveness "span all generations," the attorney general said.

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 2000s," he said.

Parents or grandparents who co-signed their children or grandchildren’s subprime loans will also receive relief, Bruck said.

“Student loan borrowers who thought college would be a path to success instead found themselves on the road to financial ruin as a result of Navient’s unlawful conduct,” said Sean P. Neafsey, the acting director of New Jersey's Division of Consumer Affairs. "The settlement announced today holds Navient accountable for its unconscionable conduct and provides meaningful financial relief to the borrowers harmed by it.”


NOTE: Borrowers in the affected 38 states and D.C. don't need to take any action to receive the benefits required under the settlement, authorities said. Consumers receiving private loan debt cancellation will receive a notice from Navient, and they will receive refunds of any payments made after June 30, 2021, they said.

New Jersey borrowers who are eligible for a restitution payment will automatically receive a restitution check of approximately $260 from the Attorney General’s settlement administrator in mid-2022. To ensure the settlement administrator can find you, federal loan borrowers who may be eligible for a restitution payment are encouraged to update their contact information in their account or create an account if they do not already have one.


From 1989 to 2016, the average cost of obtaining a degree from a four-year college or university in the United States rose about eight times as fast as the average wage, statistics show.

Faced with the soaring cost of higher education, more than 44 million people Americans have outstanding student loans totaling now more than $1.75 trillion nationwide, Bruck said.

The average New Jersey borrower carries $35,730 in student debt -- among the highest in the country -- according to some sources, the attorney general said.

Student loan servicers are a "critical link between borrowers and lenders," he said. "In addition to managing borrowers’ accounts and processing their monthly payments, student loan servicers are responsible for assisting financially struggling borrowers to enroll in alternative repayment plans or request a modification of loan terms from lenders."

Navient, formerly known as Sallie Mae, was one of the nation’s largest servicers of both federal and private student loans until partially exiting the business in September 2021, Bruck said.

By then, its student loan origination and servicing business had severely screwed young borrowers, deliberately fooling some of them into paying back more money than was due at the time by lying about the amounts, he said.

Navient "engaged in unconscionable commercial practices, deceptive conduct, and misrepresentations when servicing thousands of New Jersey consumers’ student loans over the past decade – boosting company profits at the expense of struggling borrowers," Bruck said.

The consequences of its conduct likely had the greatest impact on borrowers who could least afford it, he said.

A study by the New York Federal Reserve found that borrowers in black-majority zip codes were more likely to borrow to fund their education, the attorney said. They also have higher average loan balances and default at almost double the rate of white-majority zip code borrowers, the study found.

Among the other findings:

  • borrowers who received Pell Grants -- most of whom have family incomes below $40,000 -- were five times as likely to default within 12 years;
  • borrowers whose parents did not attend college were more than twice as likely to default than borrowers whose parents did attend college;
  • borrowers who began their education at for-profit colleges defaulted at seven times the rate of those who attended public colleges.

New Jersey officials filed their suit in October 2020 in Essex County, accusing Navient Corp. and Navient Solutions LLC of “deceptive and unconscionable tactics at various times over the last decade” in violation of New Jersey consumer protection laws.

This included training Navient employees to “collect more than the past due amount by using language that misled borrowers about how much they owed,” the division reportedly. “Specifically, Navient sought to collect not only the delinquent amount but also the next month’s payment by misleadingly calling the amount sought the ‘Present Amount Due.’

The result: Borrowers were forced into paying hundreds of dollars more than they’d budgeted for individual payments.

The state suit also accused Navient of:

  • Steering borrowers having financial trouble into forbearance instead of repayment options and loan-forgiveness programs, causing unnecessary accrual of interest, the addition of interest to the principal and lost months of timely payments that would have otherwise counted toward loan forgiveness;
  • Failing to inform borrowers of deadlines to recertify their eligibility for certain income-driven repayment plans – the consequences of which included boosting their monthly payments and causing other financial damages when their plans unnecessarily expired;
  • Enticing borrowers to take out private student loans with a family member or someone else as cosigner, then making it exceedingly difficult to have the cosigner released from any obligations.

A spokesman for Navient, in turn, accused the state of "recycled baseless allegations" at the time.

On October 20, 2021, Navient’s contract to service 5.6 million loans owned by the U.S. Department of Education was transferred to Maximus/AidVantage, Bruck said Thursday. Following completion of this transfer, Navient will continue to service its existing portfolio of private student loans and legacy Federal Family Education Loan (FFEL) program loans issued before the FFEL program ended in 2010, he said.

New Jersey borrowers who are having issues with their student loans that they are unable to resolve with their student loan servicers can file a complaint by calling 1-800-446-7467 or online by completing a banking formal complaint form by clicking “Consumer Assistance - Inquiries/Complaints” here: 


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