Home  »  News   »   Navient Cancels $1.7 Billion in Student Loan Debt

Navient Cancels $1.7 Billion in Student Loan Debt

Navient Cancels $1.7 Billion in Student Loan Debt

On January 13th, a multi-state lawsuit filed against Navient, a servicer of federal student loans, will soon cancel student loan debt totaling $1.7 billon. This amount covers the private loan debt held by around 66,000 students.

Deceptive Practice Allegations

Navient Corporation agreed to the settlement in allegations of deceptive lending practices brought against the company by 39 State Attorneys General. The company maintains its innocence, even after agreeing to the settlement.

“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,” declared Mark Heleen, one of Navient’s legal officers (WSJ).

Navient gave private loans to students with poor credit, many of whom attended institutions with questionable standards. A large number were for-profit schools, who have repeatedly come under fire for promises made to potential military students. For-profit institutions must make at least 10% of their income from non-federal sources in order to accept VA education payments, which can lead them to take desperate measures.

Navient recently announced its exit from servicing student loans. The company used to be part of Sallie Mae, but it split off in 2014. A majority of the loans being cancelled are ones issued before the company left Sallie Mae.

RELATED: Debating the 90/10 Rule

The Multi-State Settlement

According to the Navient Multi-State Settlement website, the settlement includes $1.7 billion in debt cancellation and $95 million in restitution.

Restitution payments of about $260 will be distributed to approximately 350,000 federal loan borrowers whose loans were placed in forbearance.

Borrowers whose debts are soon to be cancelled will receive a notice and a refund from Navient if they’ve made any payments on the cancelled loans. Look for that after June 30th, 2022.

As an additional punitive measure, Navient must explain to its borrowers the benefits of income driven repayment plans. It must also offer to estimate income-driven repayment amounts before placing borrowers into forbearance.

Additional conduct reforms for Navient include hiring specialists who are skilled at dealing with student borrowers. Moreover, Navient shall counsel any borrowers who are public service workers to inform them of the Public Service Loan Forgiveness (PSLF) program.

RELATED: Military Service Could Eliminate Student Loan Debt With PSLF

Replacing Navient Corp.

In mid-October of last year, the Department of Education announced that AidVantage, a property of Maximus Federal Services, Inc., will take over for Navient in the processing of federal student loans.

However, Navient will still service federal loans issued under the Federal Family Education Loan (FFEL) program.

Next Steps for Impacted Borrowers

If you believe you may be impacted by the recent Navient settlement, the only advisable action you need to take is to ensure your address is updated on your StudentAid.gov account.

As long as the Department of Education has a most current address, any settlement or restitution payments will be sent to that address.

In the Spring of 2022, the settlement administration will contact via postal mail each federal loan borrower who is eligible for restitution payments.

Keep in mind, though, that not everyone who had dealings with Navient will receive forgiveness or restitution. There are conditional requirements that must be met by borrowers. For example, students:

  • Must have studied at certain for-profit institutions
  • Received their loans between 2002 and 2014
  • Must be at least seven months behind on payments
  • Must live in certain states covered by the settlement. That’s most states, but not all of them.

The Navient Settlement website lists, at the bottom of the homepage, all the states involved in the multi-state lawsuit.

So, again, as long as your information is up-to-date with the Department of Education, you will be notified sometime in the middle of 2022 via postal mail.

 

RELATED: