Numerous student loan borrowers are expected to receive long-awaited debt relief as a result of a $1.85 billion consent judgment reached with Navient, one of the nation’s largest student loan servicers, announced Thursday.
If the agreement between the Delaware-based company and attorneys general from 39 states and the District of Columbia is approved by a federal court, it will put an end to state allegations that Navient engaged in unfair, deceptive, and abusive student loan servicing practices when it originated predatory loans.
It is anticipated that approximately 66,000 borrowers with private education loans who started between 2002 and 2010, when Navient was known as Sallie Mae, will have their outstanding balances cancelled under the terms of the agreement.
Additionally, 350,000 federal student loan borrowers are expected to receive $260 in restitution payments from Navient as a result of a $95 million restitution payment. The borrowers, who were having difficulty repaying their debts, were placed in forbearance programs, which caused them to fall further into debt, rather than less expensive income-based payment plans.
Corinthian Colleges and ITT Technical Institutes were among the for-profit educational institutions that closed after the federal government stopped lending to the schools where the majority of those students had been enrolled.
Student loan borrowers will receive “much needed relief,” according to Pennsylvania Attorney General Josh Shapiro, who was a key member of the legal coalition that brought the agreement to fruition.
Shapiro said in a statement announcing the agreement that “Navient repeatedly and deliberately put profits ahead of its borrowers – it engaged in deceptive and abusive practices, targeted students who it knew would have difficulty repaying their loans, and placed an unfair burden on people trying to improve their lives through education.”
Navient, on the other hand, denied any wrongdoing and stated that the company agreed to the settlement because the state lawsuits had been pending for more than eight years and were still far from the trial stage.
According to Mark Heleen, Navient’s chief legal officer, the company’s decision to resolve these matters, which were based on unfounded claims, saves the company the additional burden, expense, time, and distraction of trying to win in court, which would have been otherwise incurred. “Navient is and has always been committed to assisting student loan borrowers in understanding and selecting the most appropriate payment options for their circumstances.”