Loan servicer Navient agreed to a settlement wherein it will cancel $1.7 billion in student debts. Navient will also pay around $95 million in restitution.
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Navient To Cancel $1.7 Worth Of Student Debts of 66,000 Borrowers
A group of 39 attorneys general made a coordinated effort to hold Navient accountable for predatory loans made to American students. Specifically, the group wanted to stop Navient’s “widespread unfair, deceptive, and abusive student loan servicing practices.”
Navient agreed to cancel the existing student debts of 66,000 borrowers. The settlement covers claims dating back to 2009 and will total $1.7 billion.
Eligible private student loan borrowers should receive a notice from Navient by July 2022. For borrowers who made any payments after June 30, 2021, Navient will also refund these payments.
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In addition, the company will also pay $95 million in restitution. The $95 million funds earmarked for restitution will go to around 350,000 federal student debt borrowers. Each student will receive approximately $260 via a mailed postcard.
Deceptive and Abusive Practices
Pennsylvania Attorney General Josh Shapiro, who led the coalition of 39 states, issued a statement regarding the settlement. “Navient repeatedly and deliberately put profits ahead of its borrowers,” he said.
The company engaged in abusive practices and targeted vulnerable students. Moreover, the loan company “placed an unfair burden on people trying to improve their lives through education.”
Shapiro said that with the settlement, Navient can correct its past behavior. It will also provide the needed relief for borrowers. Finally, the agreement provides safeguards that ensure that the company “never preys on student loan borrowers again.”
Navient Agrees To Settlement But Denies Wrongdoing
However, Navient denies any wrongdoing even as it agreed to the settlement, which resolves all six AG lawsuits against it. In fact, Navient executives will continue to push back against the claims.
Chief Legal Officer Mark Haleen said that Navient just wants to move on. “The company’s decision to resolve these matters, which were based on unfounded claims,” he said. Agreeing on the settlement “allows us to avoid the additional burden, expense, time and distraction to prevail in court.”
Haleen said that Navient continues to focus on helping Americans with student debts. He said that they will continue helping borrowers “understand and select the right payment options to fit their needs.
In fact, we’ve driven up income-driven repayment plan enrollment and driven down default rates”. Haleen pointed to the company’s track record. “Every year, hundreds of thousands of borrowers we support successfully pay off their student loans.”
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Student Debt Advocates Hail Landmark Settlement
A company representative issued an email statement that gave out details. “Navient booked an after-tax charge of approximately $170 million due to the agreement. The value of the canceled defaulted loans is approximately $50 million.”
Meanwhile, student debt advocates hailed the settlement. Mike Pierce, executive director of the Student Borrower Protection Center, said many borrowers are now heaving a sigh of relief.
He said that this is a victory for “millions of borrowers whose pain Navient and Sallie Mae shamelessly turned into profit”. Sallie Mae is Navient’s predecessor company in the student loan business.
Pierce accused Navient of cheating borrowers at every stage of the repayment. It also took advantage of low-income borrowers, disabled veterans, and senior citizens.
“Borrowers may not be able to enjoy Navient CEO Jack Remondi’s $8 million salary,” he said. “But they can rest a little bit easier knowing that a measure of justice has been served.”
Watch the CBS Evening News video reporting that Navient reaches settlement over student loan practices:
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