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Navient agrees to $1.85 billion in student loan settlement; $53 million returning to Missouri borrowers

(KWCH)
Published: Jan. 13, 2022 at 2:46 PM CST
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JEFFERSON CITY, Mo. (KY3) - The Missouri Attorney General’s Office and Navient, one of the nation’s largest student loan servicers, have agreed to a $53 million in a settlement intended to resolve allegations of predatory lending.

The deal will settle litigation brought by 38 state attorneys general. The settlement claimed that Navient engaged in deceptive practices and made predatory lending to students who were unlikely to be able to pay back such loans.

More than 400,000 student loan borrowers will get some debt relief from Navient as part of the settlement, CNN reports.

Missouri Attorney General Eric Schmitt announced the state would receive more than $53 million in the settlement, including $2.5 million in restitution and $51 million in private loan debt cancellation.

“In this case, my office obtained over $53 million in debt relief and restitution to resolve allegations of widespread unfair and deceptive student loan servicing,” said Schmitt. “Taking advantage of students who need assistance in funding their educations is illegal, and can hurt the futures of so many. This settlement is a great result for Missouri students, and for the entire state.”

According to a news release from Attorney General Eric Schmitt:

This settlement resolves claims that since 2009, after representing that it would help borrowers find the best repayment options for them, Navient steered struggling student loan borrowers into costly long-term forbearances instead of counseling them about the benefits of more affordable income-driven repayment plans. According to the Attorney General, the interest that accrued because of Navient’s steering practices was added to the borrowers’ loan balances, pushing borrowers further in debt.

Navient also allegedly originated predatory subprime private loans to students attending for-profit schools and colleges with low graduation rates, even though it knew that a very high percentage of such borrowers would be unable to repay the loans. 

Moving forward, Navient will be required to...

  • Explain the benefits of income-driven repayment plans, as well as offer to estimate income-driven payment amounts before placing borrowers into optional forbearances.
  • Train specialists who will advise distressed borrowers concerning alternative repayment options.
  • Notify borrowers about the U.S. Department of Education’s new PSLF opportunity, which is temporarily offered to millions of qualifying public service workers

Borrowers receiving private loan debt cancellation will receive a notice from Navient, along with refunds of any payments made on the cancelled private loans after June 30, 2021.

Federal loan borrowers who are eligible for a restitution payment of approximately $260 will receive a postcard in the mail from the settlement administrator later this spring.

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