Loans

Attorney General Josh Shapiro Announces $1.85 Billion Landmark Settlement with Student Loan Servicer Navient – PA Office of Attorney General

The settlement includes canceling $1.7 billion in debt and repaying $95 million; Borrowers in Pennsylvania will receive more than $70 million in relief

HarrisburgAttorney General Josh Shapiro announced today that Navvent, known as one of the nation’s largest providers of student loan services, will provide relief totaling $1.85 billion to resolve allegations of widespread unfair, fraudulent and abusive student loan service practices in the creation of predatory student loans.

“Repeatedly, Navient advances profits before borrowers — it has engaged in deceptive and abusive practices, it has targeted students who I knew would struggle to repay loans, and it has imposed an unfair burden on people trying to improve their lives through education,” said the attorney, General Shapiro. “Today’s settlement corrects Navient’s past behavior, provides much-needed relief to Penn State borrowers, and puts in place safeguards to ensure that this company does not infringe on student borrowers again.”

The settlement, joined by a coalition of 39 attorneys general, resolves allegations that since 2009, although it will help borrowers find the best repayment options for them, Navient has directed struggling student loan borrowers to incur costly long-term costs rather than Advise them on the benefits of affordable and income-based payment plans.

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 highly profitable private federal and “prime” loans, without regard to borrowers and their families, many of whom are unknowingly entrapped in debt they cannot repay.

Our investigation revealed two fraudulent and unfair schemes used by Navient that broke the law and put their profits on those they serve. Navient’s first scheme involved issuing high-risk private loans to borrowers who knew they couldn’t repay the money—similar to the 2008 mortgage crisis. The second scheme we discovered was Navient’s drive to mislead and bore borrowers, preventing them from repaying the principal. Shapiro said:

Under the terms of the settlement, Navient will cancel the remaining balance on approximately $1.7 billion in private high-risk student loan balances owed by nearly 66,000 borrowers nationwide. In addition, 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 into certain types of long-term tolerances. 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.

Approximately 13,000 Pennsylvania borrowers will receive $3.5 million in redemption payments and another 2,467 Pennsylvania will receive $67 million for debt cancellation. In total, lawsuits and settlements by Attorney General Shapiro have led to the cancellation of more than $132.5 million in private student loans since 2017.

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 of the recently announced US Department of Education PSLF Limited Opportunity Waiver, which temporarily allows millions of eligible public service workers the opportunity to receive previously unqualified repayment periods that count as loan forgiveness — provided they are incorporated into the Direct Program Loan and employment certificate file By October 31, 2022. The attorney general encourages all Pennsylvania residents who work in the government or not-for-profit sectors to review the PSLF website to determine if they qualify for loan forgiveness.

As a result of today’s settlement, borrowers who receive private loan debt cancellation will receive a notification from Navient by July 2022, along with refunds of any payments made on canceled private loans after June 30, 2021. Private loan borrowers do not need to take any business to qualify for relief.

Federal loan borrowers who qualify for a compensation payment of approximately $260 will receive a postcard in the 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.

Attorney General Shapiro filed a lawsuit against Navient in October 2017. Over the course of four years of litigation, Shapiro’s office has denied an application to deny, and has secured significant court rulings regarding the Privacy Act, the Higher Education Act and the Consumer Financial Protection Act. And in July 2020, the U.S. Court of Appeals for the Third Circuit confirmed lower court rulings allowing the attorney general’s lawsuit against Navint to proceed.

Attorney General Shapiro filed the settlement as a proposed consent ruling today in the US District Court for the Central District of Pennsylvania. The settlement will require court approval.

Attorney General Shapiro co-led litigation and settlement negotiation with Washington, Illinois, Massachusetts, and California. The settlement was joined by attorneys general in Arizona, Arkansas, Colorado, Connecticut, 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, Regon, North Carolina, Rhode Island, OR Carolina, Tennessee, Vermont, Virginia, West Virginia and Wisconsin.

The case was brought by First Deputy Attorney General Jill Ambrose, Deputy Attorney General Francesca Eveno, Deputy Attorney General Jesse Harvey, Assistant Director of Consumer Financial Protection Nicholas Smith, and Supervising Agent Catherine Passarelli. Attorney General Shapiro acknowledges his office in Pittsburgh for his exceptional work on this case over the past four years.

Since Attorney General Shapiro launched the Consumer Financial Protection Unit in July 2017, the unit has received more than $328 million in relief for more than 126,000 consumers in Pennsylvania. This number includes $89.67 million in compensation, $41.81 million in fines and other payments, and $196.77 million in debt cancellation.

# # #

About the author

Publishing Team

Leave a Comment