Navient Predatory Student Loan Suit Ends in $1.85 Billion Settlement
Nearly 66,000 student loan borrowers got some financial relief on Thursday after Navient, one of the country’s biggest loan servicing companies, reached a $1.85 billion settlement over predatory and deceptive loan practices.
The settlement with 39 states requires Navient to cancel $1.7 billion in delinquent private student loan debts and pay $95 million in restitution, The New York Times reported.
Most borrowers who will be forgiven under the settlement attended for-profit schools that have poor records in terms of graduation rates and job placements. Navient reportedly anticipated that more than 90% of the private loans would default but decided the trade-off was worth it because of the profit it would earn from separate federal student loans guaranteed by the government.
In legal filings, Navient referred to the private loans as a “baited hook” to get more federally backed loans, according to The New York Times.
Pennsylvania Attorney General Josh Shapiro, who led a lawsuit against Navient in 2017 that included several other state attorneys general, accused Navient of steering borrowers further into debt through forbearance practices, NBC News reported. Under these practices, borrowers could temporarily postpone repayment while still being charged interest.
Shapiro also accused Navient of using risky subprime private loans to convince students to attend for-profit colleges, knowing they wouldn’t be able to repay the debts.
“Navient repeatedly and deliberately put profits ahead of its borrowers — it engaged in deceptive and abusive practices, targeted students who it knew would struggle to pay loans back, and placed an unfair burden on people trying to improve their lives through education,” Shapiro said in a statement.
In addition to the state lawsuits, the Consumer Financial Protection Bureau filed a federal lawsuit against Navient claiming the company inflated borrowers’ bills by billions of dollars.
The settlement with Navient comes as millions of student loan borrowers are preparing to resume payments after those payments were paused during the COVID-19 pandemic.
As previously reported by GOBankingRates, payments of federal student loans were originally set to begin again on Jan. 31. But President Joe Biden extended the pause on federal student loan repayments for an additional 90 days, through May 1.
As for Navient — which formed in 2014 when Sallie Mae split into two companies — part of its settlement allows it to deny any wrongdoing. And that’s exactly what the company is doing.
“The company’s decision to resolve these matters, which were based on unfounded claims, allows us to avoid the additional burden, expense, time and distraction to prevail in court,” Mark Heleen, Navient’s chief legal officer, said in a statement.
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