Guide

AG Ferguson lawsuit nets $45M in debt relief, payments from Navient

Debt forgiveness, and reparations, will go to Washington borrowers affected by Navint’s deceptive practices

Seattle – Attorney General Bob Ferguson announced today that as a result of his lawsuit, the Navient Student Loan Service will provide approximately $45 million in debt relief, compensation and costs to resolve Washington’s lawsuit. Ferguson asserted that Navient, a branch of Sallie Mae that was then the largest student loan provider in the country, engaged in numerous unfair and deceptive practices that harm Washington’s student borrower.

Washington was the first state, along with Illinois, to file a lawsuit against Navint, and the first to obtain a ruling that Navvent broke the law.

The student loan giant will:

  • Provide more than $35 million in debt relief, erasing the remaining debt of more than 1,400 Washington residents who took out certain private student loans between 2002 and 2014—an average of $25,000 per person;
  • paid $2.3 million in compensation to approximately 8,900 Washington borrowers registered in the forbearance for an extended period of time between 2009 and 2017; And
  • He paid Washington $7 million to cover costs from the complex, multi-year investigation and litigation, along with future implementation of the state’s consumer protection law.

Washington people need not take any action to obtain these benefits. Borrowers who receive a private loan debt cancellation will receive notice from Navient, and they will receive refunds for any payments made on those loans after June 30, 2021. Washington residents who qualify for recovery payments will receive a postcard in the mail from the attorney general’s settlement official in the next several months. Federal student loan borrowers who may be eligible for refund payments are encouraged to update their contact information in their studentaid.gov account or create one if they do not already have one.

For more details and the latest information, please visit www.NavientAGSettlement.com.

Borrowers Who Will Get Compensation or Debt Forgiveness Extends to All Generations: Navient’s Detrimental Behavior Impacted Everyone From Students Who Enrolled in College and University Right After High School to Students Mid-Career Who Dropped Out After Enrolling in a For-Profit School in the Early 2000s Twenty one.

“Higher education should not equate to a lifelong debt penalty — and student loan companies have no right to deceive the citizens of Washington in order to maximize their profits,” Ferguson said. “We hold the nation’s largest student loan service provider, bring difficult corporate reforms, and help repair the damage done to Washington’s borrowers. We will continue to fight to prevent the financial exploitation of debt-burdened Washington students.”

Bearing was easy for Navient and bad for borrowers

Navient will pay compensation to Washington students who enroll in it at forbearance in lieu of a full explanation of the benefits of income-driven repayment plans. Navient unfairly induced borrowers to be impatient, which was good for the company because it was simple and cheap, but did long-term harm to most borrowers. Patience allowed borrowers to temporarily suspend payments, but their interest continued to pile up. When the repayment resumes, the accumulated interest will be added to the principal of the loan, which means that the borrowers ended up paying interest on their initial interest. Unlike forbearance, income-based plans offer loan forgiveness after 20 or 25 years of eligible payments, and can provide valuable interest subsidies. Under income-driven plans, payments can be as low as $0 per month.

Resolution details

Ferguson submitted the proposed ordinance of consent for entry today in the King County Superior Court. The consent decree still requires court approval.

Today’s decree of approval will apply to thousands of Washingtonians:

  • Approximately 847 Washington residents, from 2002 to 2014, took out private student loans and had late payments for more than seven consecutive months prior to June 30, 2021. Any remaining balances on these loans will be voided.
  • Approximately 717 Washington residents who, from 2002 to 2014, took out non-high-risk private student loans to attend some for-profit private college (including ITT, DeVry, Corinthian Colleges, and the University of Phoenix), and who had late payments of more than from seven consecutive months prior to June 30, 2021. Any remaining balances on these loans will be voided.
  • Washington who contacted Navient due to long-term financial difficulties with non-Parent PLUS federal student loans, and have been registered with forbearance for an extended period of time. The approximately 8,900 eligible student borrowers can expect to receive a check for approximately $260 in the coming months.

Today’s consent decree also contains extensive injunctive provisions to prevent Navient from engaging in similar harmful behavior in the future.

It also requires Navient to notify borrowers of significant recent changes the U.S. Department of Education has made to the Public Service Loan Forgiveness (PSLF) program, which offers millions of eligible government employees a waiver that may account for prior payments or repayment periods for loan forgiveness.

Ferguson encourages all Washington residents who work in the government or nonprofit sectors to review the PSLF website or refer to the Washington Student Loan Advocate website to determine if they qualify for loan forgiveness.

Student loan borrowers who have questions or complaints about their student loans can contact the Washington Student Loan Attorney’s Office using the Washington Student Complaints Portal at studentcomplaints.wa.gov.

On October 20, 2021, Navient transferred its services of 5.6 million loans owned by the US Department of Education to a company called Maximus, which will provide loans under the trade name AidVantage. After this conversion is completed, Navient will continue to service its existing portfolio of old private student and federal family education loans issued prior to the program’s expiration in 2010.

Relief nationwide

Ferguson, along with attorneys general for Illinois, Pennsylvania, California, Massachusetts, Ohio and North Carolina, as well as the Consumer Financial Protection Bureau (CFPB), led an investigation into Navient’s business practices. Ferguson, the Illinois attorney general, and the Financial Anti-Corruption Bureau filed initial lawsuits against Navent on the same day in January 2017, then other states followed suit.

Under the terms of the settlement, Navient will cancel the remaining balance of nearly $1.7 billion in some private student loan balances owed by 66,000 borrowers nationwide in 39 states. In addition, Navient will pay $142.5 million to 32 state attorneys general. In addition, Navient will alert consumer credit bureaus to reflect debt cancellation in the credit reports of borrowers and co-signers, and to return some payments sent after June 30, 2021.

Ferguson’s first lawsuit leads to a judge’s ruling against Navint

Ferguson’s lawsuit asserts that Navient deceptively promoted the “co-location launch” feature of private loans to entice family and friends to co-sign the loans. However, Navient put up barriers to obtaining the co-location release without informing consumers in advance, and failed to disclose that very few borrowers achieved the co-location release.

In March 2021, King County Superior Court Judge Veronica Galván ruled that Navient had violated state consumer protection law with his unfair and deceptive behavior related to this program. It was the first time a judge had ruled that Navient violated consumer protection law in a student loan service lawsuit brought by the state attorney general or the Federal Consumer Protection Agency.

The lawsuit also asserted that Navient engaged in additional illegal business practices:

  • offering mortgage and plunder loans to students attending for-profit colleges at low graduation rates, despite its expectation that a very high percentage of borrowers would not be able to repay those loans;
  • have committed unfair and misleading acts by giving patience to financially distressed student borrowers rather than informing them of the terms and benefits of federal income-based payment plans;
  • fails to inform borrowers who have chosen repayment programs based on their income that they have an annual obligation to re-certify their income and family size;
  • misapplied borrower payments, and failed to provide a means for borrowers to provide standing instructions for how to allocate overpayments; And
  • She trained her agents to deceptively require borrowers to make an amount including the next regular payment, without making it clear that this was not necessary to fix the late payment.

Assistant Attorney General Julia Doyle, Heidi Anderson, Craig Rader, Kathleen Books, Shane Colgan, Tad Robinson O’Neill, Danielle Allen, Joe Kannada, Mina Shaheen, Audrey O’Dachine; detectives Lord Fuentes, Victoria Sooner, Rebecca Hartsock, Anton Forbes and Christopher Welch; paralegals Javier Tersvina, Kelly Goins and Amanda Bartling; And legal assistants Michele Paul, Christopher Kiefer, Joshua Bennett, Christina Winfield and Serena Clark, handled the case for the attorney general’s office.

Former assistant attorney generals Trisha McArdle and Shannon Smith and former assistant attorney general Benjamin Roach also worked on the case, but have since left the attorney general’s office.

Ferguson focus on reforming student metaphor

Ferguson proposed the Student Loan Transparency Act in 2017 as legislation for the attorney general’s request. The law requires schools to provide students with basic information about their student loans. The bill was approved by an overwhelming majority in the House of Representatives with a bipartisan vote and unanimously in the Senate.

In 2018, the legislature passed the Student Loan Rights Act, which required Ferguson to provide vital protections to student borrowers in Washington state. The act created a dedicated student loan advocate to help students navigate the murky world of loan providers and adopted standards for student loan providers. The law also provided students with basic safeguards: Student loan providers must credit borrowers’ payments within one business day, respond to requests for information promptly in written form, and refund erroneously assessed fees, among other criteria.

Ferguson previously secured millions of dollars in debt relief for thousands of student borrowers who attended for-profit colleges that used misleading and misleading hiring practices. It also brought back nearly $1.6 million from cracking down on debt-settlement companies that charge fees to help borrowers consolidate their federal student loans and enroll in income-paid repayment plans — tasks that loan providers to borrowers can and should help them with for free.

To assist student loan borrowers in Washington, the Office of the Attorney General has compiled a Student Loan Survival Guide. This guide provides tips and links to resources to help high school students considering college, former college students unable to keep up with their payments, students’ parents, and everyone in between.

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The Washington Attorney General serves the people and the state of Washington. As the state’s largest law firm, the Office of the Attorney General provides legal representation to every Washington government agency, board, and committee. In addition, the office serves the people directly by enforcing consumer protection, civil rights, and environmental protection laws. The office also sues elder abuse, Medicaid fraud, and handles sexually violent predator cases in 38 of Washington’s 39 counties. visit www.atg.wa.gov To learn more.

Media contact:

Briuna Aho, Director of Communications, (360) 753-2727; Brionna.aho@atg.wa.gov

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