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Navient, the target of a bipartisan coalition of 39 attorneys general agreed to cancel $1.7 billion in private student loan debt and offered $95 million in restitution for thousands of students nationwide following an investigation into the company's business practices.
New York Attorney General Letitia James announced the agreement on Thursday, Jan. 13, which will include more than $110 million for New York student borrowers.
Since 2009, the investigation determined that Navient “has been steering struggling student loan borrowers into costly, long-term forbearances instead of counseling them about the benefits of more affordable income-driven repayment plans.”
Interest accrued as a result of those actions led to borrowers’ seeing their loan balances increased and pushed them further into debt.
James said that if Navient had provided borrowers with the help that was initially promised, “income-driven repayment plans could have reduced payments to as low as $0 per month, provided interest subsidies, and/or helped attain forgiveness of any remaining balance after 20 to 25 years of qualifying payments.”
According to the attorney general, Navient will cancel the remaining balance on nearly $1.7 billion in subprime, private student loan balances owed by nearly 66,000 borrowers nationwide.
Of the $95 million in restitution, approximately $260 is expected to be paid out per borrower.
New York will receive a total of about $6.8 million in restitution payments for more than 25,000 federal loan borrowers. Additionally, about 4,300 New York borrowers will receive over $110 million in private loan debt cancellation.
The state will also receive nearly $1.2 million in cash.
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," James said.
Borrowers in the affected 38 states and Washington, DC don't need to take any action to receive the benefits required under the settlement, authorities made note of.
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.
“For too long, Navient contributed to the national student debt crisis by deceptively trapping thousands of students into more debt,” James said in a statement. “Today’s billion-dollar agreement will bring relief to thousands of borrowers in New York and across the nation and help them get back on their feet.
“Navient will no longer be able to line its pockets at the expense of students who are trying to earn a college degree. Student loan servicers that operate through deception and wrongdoing will not be tolerated and will be held accountable by my office.”
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