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AG Tong Announces Settlement With Student Loan Servicer Navient

AG Tong Announces Settlement With Student Loan Servicer Navient
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Attorney General William Tong

01/13/2022

Attorney General Tong, Consumer Protection Commissioner Seagull, and Banking Commissioner Perez announce $1.85 billion settlement with Servicer Navient student loan

Thousands of Connecticut borrowers will get loan forgiveness and refund

(Hartford, Connecticut) — Attorney General William Tong, Consumer Protection Commissioner Michael Segal and Banking Commissioner Jorge Perez announced today a $1.85 billion settlement with the Navient Student Loan Service that will channel millions in debt to thousands of Connecticut borrowers.

This settlement, joined by a coalition of 39 attorneys general, resolves allegations of widespread unfair and misleading student loan service practices and abuses in predatory student loan creation. The states have claimed that since 2009, despite their pledge to help borrowers find the best repayment options for them, Navient has directed distressed student loan borrowers to take on long-term costs and away from affordable income-based repayment plans.

In Connecticut, 1,339 borrowers will receive $19 million in direct private loan debt forgiveness. In addition, 4,875 borrowers will receive approximately $1.3 million in compensation. The state will receive $141,240 in compensation into the general fund.

“Navient directed borrowers into costly repayment plans, and away from affordable, affordable options and programs. Their predatory loans have left thousands of Connecticut families saddled with unsustainable debt. This settlement will send millions of dollars directly to thousands of Connecticut borrowers who have been duped by Navient’s abusive practices. , ” Prosecutor Tong said. “This is a massive victory for borrowers, but there is still a lot of work ahead to address the overwhelming financial burden of student loan debt. Connecticut families owe billions of dollars in student loans, an insurmountable barrier for many looking to own their own home or Starting a family or growing a business. I am committed to continuing to work alongside my fellow attorney generals, and with state and federal officials, to address this financial crisis and ensure universal access to education at an affordable cost.”

“Graduation and earning a college degree should be an exciting milestone, but for many people, that achievement has become a devastating and costly burden,” DCP Commissioner Michael Nawras said. “Thanks to Attorney General Tung for his persistence in this case, which will have a direct impact in holding student loan companies accountable for the promises they make to borrowers. We know this settlement will help the many people who have entered into expensive loan agreements and are still struggling to pay them back. “.

I would like to thank Attorney General Tong for his leadership in this case. Given the administration’s recent action against Navient, this underscores the Lamont Administration’s commitment to protecting students and their families and how important it is to have partners who are dedicated to this mission. The department maintains an unwavering commitment to holding these companies accountable when they violate our laws to the detriment of Connecticut borrowers.” said Banking Commissioner Jorge Perez.

Attorney General Tong filed the settlement as a proposed conditional ruling and complaint today in Hartford Superior Court. The settlement will require court approval.

According to prosecutors, the interest that accrued due to Navient’s patience guiding practices was added to borrowers’ loan balances, driving the borrowers into more debt. Had the company provided the assistance it promised to borrowers instead, income-driven repayment plans would likely have reduced payments as low as $0 per month, provided interest subsidies, and/or helped obtain relief from any remaining balance after 20- 25 years of qualifying payments (or 10 years for eligible borrowers under the Public Service Loan Forgiveness Program).

Navient is also alleged to have created massive private subprime loans for students attending for-profit schools and colleges with low graduation rates, even though she knew that a very high percentage of these borrowers would not be able to repay the loans. Navient allegedly offered these high-risk loans as an “incentive to get schools to use Navient as a preferred lender” for high-yield federal and “prime” loans, without regard to borrowers and their families, many of whom are unknowingly entrapped in unrepayable debts.

Under the terms of the settlement, Navient will cancel the remaining balance on $1.7 billion in private high-risk student loan balances owed by more than 66,000 borrowers nationwide. In addition, Navient will pay $142.5 million to prosecutors. A total of $95 million in redemption payments of approximately $260 each will be distributed to approximately 350,000 federal borrowers who have been placed in certain types of long-term forbearance. Borrowers Who Will Get Compensated or Debt Canceled Across All Generations: The Impact of Navient’s Detrimental Behavior on Everyone from Students Who Enrolled in College and University Right After High School to Mid-Career Students Who Dropped Out After Enrolling in a For-Profit School Early to Mid-2000 second.

Settlement involves making reforms that require Navient to explain the benefits of income-paid repayment plans and provide an estimate of the amounts of income-paid repayments before putting borrowers into voluntary bearing. In addition, Navient shall train professionals who will advise distressed borrowers regarding alternative repayment options and advise public service personnel regarding Public Service Loan Forgiveness (PSLF) and related programs. The behavior reforms imposed by the settlement include a ban on compensating customer service agents in a way that incentivizes them to reduce the time they spend advising borrowers.

The settlement also requires Navient to notify borrowers about the recently announced US Department of Education PSLF Limited Waiver Opportunity, which temporarily gives millions of eligible public service workers the opportunity to obtain previously ineligible repayment periods that count toward loan forgiveness – provided they are integrated into the direct loan program and provide employment certificates By October 31, 2022.

As a result of today’s settlement, borrowers who receive private loan debt cancellation will receive a notice from Navient by July 2022, along with refunds of any payments made on canceled private loans after June 30, 2021. Federal borrowers who are eligible for redemption will receive a payment of approximately $260 on the card. An e-mail from a settlement official later this spring.

Federal loan borrowers who qualify for exemption under this settlement do not need to take any action other than updating or creating their studentaid.gov account to ensure that the US Department of Education has their current address. For more information visit www.NavientAGSettlement.com.

Until recently, Navient had a contract for a federal student loan service owned by the U.S. Department of Education, including a large pool of loans under the Direct Loan Program and a smaller portfolio of loans under the Federal Family Education Loan (FFEL) program. On October 20, 2021, the US 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 offered under the FFEL program owned by private lenders, as well as private non-federal student loans.

Today’s settlement was led by Pennsylvania, Washington, Illinois, Massachusetts, and California, joined by attorneys general in Arizona, Arkansas, Colorado, Connecticut, District of Columbia, Delaware, Florida, Georgia, Hawaii, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Michigan, New York, Minnesota, Minnesota, Minnesota, New Mexico, New York, North Carolina, Ohio, Oregon, Rhode Island, South Carolina, Tennessee, Vermont, Virginia, West Virginia, and Wisconsin.

Assistant Attorney General John Langmaid and Assistant Deputy Attorney General Joe Chambers, Head of Financial Services and Revenue, assisted the attorney general in the matter.

Additional Resources Regarding Student Loan Options

US Department of Education Federal Student Aid Office (“FSA”) provides information and guidance regarding federal student loans, including applying for federal student loans and the repayment and forgiveness process. click here To submit a complaint or inquiry to the Student Loan Ombudsman group of the Financial Supervisory Authority.

the Consumer Financial Protection Bureau (“CFPB”) provides useful tools and resources for those preparing for college or paying off student loans. click here To submit a complaint or inquiry to the CFPB.

the Connecticut Division of Banking Services It investigates complaints about student loan services, including alleged violations of Connecticut laws regarding student loan service, and provides useful resources for student loan borrowers. click here To submit a complaint or inquiry to the department.

Customers can also submit complaints to the Prosecutor’s Office in a https://www.dir.ct.gov/ag/complaint/.

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Media contact:

Elizabeth Benton
elizabeth.benton@ct.gov

Consumer inquiries:

860-808-5318
attorney.general@ct.gov

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