An infamous student loan provider is paying big to settle accusations of shady lending practices.
Navient is canceling $1.7 billion in student loans after accusations of predatory lending
Over the past few years, demands to cancel student loans have picked up momentum nationwide. While the fight to relieve people from student loan debt is far from over, on Thursday there was one small victory: Student loan servicer Navient is paying out $1.8 billion to settle a lawsuit accusing the company of predatory behavior.
In 2017, a federal regulator and two state attorneys sued Navient, which had branched off from Sallie Mae only three years earlier. The Consumer Financial Protection Bureau’s legal filing alleged that Navient mishandled loans, hid critical information in fine print, and overall “failed to perform its core duties in the servicing of student loans, violating federal consumer financial laws as well as the trust that borrowers placed in the company.”
On Thursday, Navient finally decided to settle the lawsuit rather than go to trial. As part of its settlement, the company will cancel $1.7 billion in private student loan debts for about 66,000 people in 39 states. In addition, Navient will have to pay $95 million in restitution to about 350,000 borrowers who were put into certain types of long-term forbearances, coming out to around $260 per borrower.
“Too many New Jerseyans have struggled to pay off their student loans,” New Jersey’s acting Attorney General Andrew Bruck said in a statement. “And too many of those borrowers have had a harder time because their student loan servicer put corporate profits above their best interests. With today’s settlement, we are holding one of the country’s largest student loan servicers accountable, and we are putting millions of dollars back in our residents’ pockets.”
Before Navient partially exited student loan servicing in 2021, it was one of the country’s biggest servicers for both federal and private student loans. At the time, it ended its contract with the Department of Education and transferred about 5.6 million borrower accounts to another company, Maximus, which you might know as Aidvantage.
Still, Navient has retained portfolios worth billions of dollars, The New York Times reported. So even though Navient isn’t as big of a player in the loan servicing business as it once was, this settlement is still a big deal. Pennsylvania Attorney General Josh Shapiro said in a statement, “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.”
“Today’s settlement corrects Navient’s past behavior, provides much needed relief to Pennsylvania borrowers, and puts in place safeguards to ensure this company never preys on student loan borrowers again,” Shapiro continued.
According to Shapiro’s office, Navient engaged in a few predatory schemes. First, it gave subprime private loans to people whom they knew would not be able to pay those loans back, which Shapiro compared to the mortgage crisis in 2008. Additionally, Navient would often mislead borrowers into forbearance, which meant borrowers would no longer be able to pay down the principal amount of their loan and, instead, would gather more debt through never-ending interest payments.
Even though Navient has settled, the company refuses to admit any wrongdoing. Mark Heleen, Navient’s chief legal officer, told the Times, “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.”