January 14, 2022
Maine Attorney General Aaron M. Frey filed a Complaint and Consent Judgment today in Kennebec County Superior Court resolving alleged unfair and deceptive practices in connection with Navient’s student loan serving business. The settlement will require court approval.
According to the attorneys general, the interest that accrued because of Navients forbearance steering practices was added to the borrowers loan balances, pushing borrowers further in debt. Had the company instead provided borrowers with the help it promised, income-driven repayment plans could have potentially reduced payments to as low as $0 per month, provided interest subsidies, and/or helped attain forgiveness of any remaining balance after 20-25 years of qualifying payments (or 10 years for borrowers qualified under the Public Service Loan Forgiveness Program).
Navient also allegedly originated predatory subprime private loans to students attending for- profit schools and colleges with low graduation rates, even though it knew that a very high percentage of such borrowers would be unable to repay the loans. Navient allegedly made these risky subprime loans as “an inducement to get schools to use Navient as a preferred lender” for highly-profitable federal and prime private loans, without regard for borrowers and their families, many of whom were knowingly ensnared in debts they could never repay.
Under the terms of the settlement, Navient will cancel the remaining balance on more than $1.6 billion in subprime private student loan balances owed by approximately 62,000 borrowers nationwide. In addition, a total of $95 million in restitution payments of about $260 each will be distributed to approximately 350,000 federal loan borrowers who were placed in certain types of long-term forbearances. Borrowers who will receive restitution or debt cancellation span all generations: Navients 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 to mid-2000s.
As part of the settlement, Maine will receive a total of $308,422 in restitution payments for more than 1,157 federal loan borrowers. Additionally, Maine borrowers will receive a total of
$4,896,415 million in private loan debt cancellation.
The settlement includes conduct reforms that require Navient to explain the benefits of income- driven repayment plans and to offer to estimate income-driven payment amounts before placing borrowers into optional forbearances. Additionally, Navient must train specialists who will advise distressed borrowers concerning alternative repayment options and counsel public service workers concerning Public Service Loan Forgiveness (PSLF) and related programs. The conduct reforms imposed by the settlement include prohibitions on compensating customer service agents in a manner that incentivizes them to minimize time spent counseling borrowers.
The settlement also requires Navient to notify borrowers about the U.S. Department of Educations recently announced PSLF limited waiver opportunity, which temporarily offers millions of qualifying public service workers the chance to have previously nonqualifying repayment periods counted toward loan forgiveness-provided that they consolidate into the Direct Loan Program and file employment certifications by October 31, 2022.
As a result of todays settlement, borrowers receiving private loan debt cancellation will receive a notice from Navient, along with refunds of any payments made on the cancelled private loans after June 30, 2021. Federal loan borrowers who are eligible for a restitution payment of approximately $250 will receive a postcard in the mail from the settlement administrator later this spring.
Federal loan borrowers who qualify for relief under this settlement do not need to take any action except update or create their studentaid.gov account to ensure U.S. Department of Education has their current address. For more information, visit www.NavientAGSettlement.com.
Until recently, Navient had a contract to service federal student loans owned by the U.S. Department of Education, including a large portfolio of loans made under the Direct Loan Program and a large portfolio of loans made under the Federal Family Education Loan (FFEL) program. On October 20, 2021, the U.S. Department of Education announced the transfer of this contract from Navient to AidVantage, a division of Maximus Federal Services, Inc. However, Navient will continue to service federal student loans made under the FFEL Program that are owned by private lenders, as well as non-federal private student loans.
Today’s settlement was led by Pennsylvania, Washington, Illinois, Massachusetts, and California, and was joined by attorneys general in Arizona, Arkansas, Colorado, Connecticut, the District of Columbia, Delaware, Florida, Georgia, Hawaii, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Michigan, Minnesota, Missouri, Nebraska, Nevada, New Jersey, New Mexico, New York, North Carolina, Ohio, Oregon, Rhode Island, South Carolina, Tennessee, Vermont, Virginia, West Virginia, and Wisconsin.