Navient Student Loan Settlement Leaves Many With a Bill To Pay

sad millennial struggling with student loan debt
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Student loan giant Navient grabbed headlines last month when it agreed to cancel $1.7 billion in debt and pay $95 million in restitution for predatory lending practices, but not all of its borrowers will benefit from the settlement.

See: Navient Student Loan Settlement — Are You Eligible for $260 Restitution Payment?Listen: Live Richer Podcast, Episode 6: Ramsey Solutions’ George Kamel and Kristina Ellis

Most Navient customers still face loan payments — primarily those who never went into default on their loans, The New York Times reported.

Navient has been accused of making predatory loans to hundreds of thousands of borrowers it knew couldn’t afford them, but the settlement covered only about 66,000 borrowers who were in default. Those who have stayed current on their loans have to keep paying.

As GOBankingRates previously reported, Navient agreed to settle suits in 39 states on Jan. 13. Most of the loans in question were made between 2002 and 2014. They often came with variable interest rates and provided a shorter payment window than federal student loans, putting students in default faster if they missed payments.

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Borrowers eligible for debt cancellation must have taken out private subprime student loans through Sallie Mae — Navient’s predecessor — between 2002 and 2014. Then they must have had more than seven straight months of delinquent payments. Navient formed in 2014 when Sallie Mae split into two companies.

Meanwhile, the financial hit Navient expects to take from the settlement is probably much less than advertised because many of the loans in questions were federally guaranteed, The New York Times reported. Although the settlement requires Navient to cancel $1.7 billion in debt, the company never expected to be repaid much of that money because it already accounted for a large number of defaults. Navient reportedly told its investors that the true value of the debt it forgave was closer to $50 million.

And as part of the settlement, the company doesn’t have to compensate borrowers who stayed current on their loan payments. They must continue making the payments to Navient — and in many cases will keep doing so for a decade or more.

This has not gone over well with many borrowers who paid their Navient loans on time. One is Jacqueline Strouse Schible, who attended the Art Institute of California’s campus in San Diego. She pays $600 a month toward a $23,000 balance for her own private loans as well as loans she co-signed for her mother, who attended ITT Technical Institute.

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“It feels like such a betrayal,” Schible told The New York Times. “We’re being penalized for paying our debts.”

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About the Author

Vance Cariaga is a London-based writer, editor and journalist who previously held staff positions at Investor’s Business Daily, The Charlotte Business Journal and The Charlotte Observer. His work also appeared in Charlotte Magazine, Street & Smith’s Sports Business Journal and Business North Carolina magazine. He holds a B.A. in English from Appalachian State University and studied journalism at the University of South Carolina. His reporting earned awards from the North Carolina Press Association, the Green Eyeshade Awards and AlterNet. In addition to journalism, he has worked in banking, accounting and restaurant management. A native of North Carolina who also writes fiction, Vance’s short story, “Saint Christopher,” placed second in the 2019 Writer’s Digest Short Short Story Competition. Two of his short stories appear in With One Eye on the Cows, an anthology published by Ad Hoc Fiction in 2019. His debut novel, Voodoo Hideaway, was published in 2021 by Atmosphere Press.
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