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Student loans case settled for $1.85B

Navient agreement covers 38 states by Compiled by Democrat-Gazette Staff From Wire Reports | January 14, 2022 at 1:47 a.m.
FILE- This April 2, 2014, file photo, shows the headquarters of student loan debt collector Navient Corporation, in Wilmington, Del. Pennsylvania's attorney general says the large student loan servicer Navient has settled allegations of predatory practices for $1.85 billion. Attorney General Josh Shapiro said Thursday, Jan. 13, 2022 in a news release that the settlement includes $1.7 billion in debt cancellation and $95 million in restitution. (William Bretzger/The Wilmington News-Journal via AP, File)

BOSTON -- Navient, a major student loan collecting company, agreed to cancel $1.7 billion in debt owed by more than 66,000 borrowers across the U.S. and pay more than $140 million in other penalties to settle allegations of abusive lending practices.

The settlement with attorneys general from 38 states, including Arkansas, and the District of Columbia was announced Thursday.

Navient "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," Pennsylvania Attorney General Josh Shapiro, who helped lead the negotiations, said in a statement.

Among other things, he said, Navient misled borrowers who were having trouble making payments into entering what are known as long-term forbearances, which caused them to run up even more debt.

Forbearance is when lenders allow borrowers to pause or reduce payments for a limited time while they build back their finances. However, interest on the loan continues to accrue and can ultimately cause the amount paid over the life of the loan to be higher.

Navient denied acting illegally, and it did not admit to any wrongdoing under the settlement, which is subject to court approval.

"Navient is and has been continually focused on helping student loan borrowers understand and select the right payment options to fit their needs," Chief Legal Officer Mark Heleen said in a statement.

In addition to forgiving tens of thousands of loans, Navient will pay $142.5 million, most of which will go as restitution.

About 350,000 federal student loan borrowers who were placed in certain types of long-term forbearances will receive payments of about $260 each.

Eligible borrowers will receive a postcard in the mail this spring from the settlement administrator.

Also, Navient will be required to do more to advise borrowers of their options and explain repayment plans to them.

Massachusetts Attorney General Maura Healey called the settlement "an important step toward addressing our broken student loan repayment system."

Among those who will benefit is Ashley Hardin, 38, of Seattle. Hardin defaulted on about $108,000 in private student debt in 2020 after scrambling for more than a decade to pay off a loan she used to attend the Brooks Institute of Photography in California.

Her monthly payments were often more than her rent. For a time, Navient agreed to lower her payments to about $650 per month, but when that period ended, she owed more than $1,000 again, having to pay compound interest.

"It's a massive weight lifted," said Hardin, who was unable to make a career of photography in Seattle and now runs a food truck with her husband. "I can breathe again and feel like I'm not drowning, like I'm not going to get a call tomorrow that they're suing me for defaulting."

Nicole Scavo, 33, is one of the beneficiaries of the debt forgiveness. She received a call from Shapiro's office informing her that the $81,685 she owed for her certificate in restaurant management from the Art Institute of New York City, which closed in 2019, would be canceled.

"I can't explain how grateful I am," said Scavo, whose training never yielded a job in the field. "These loans affect everything. Because my debt-to-income is so high, I can't get good rates on a car loan or a mortgage."

Scavo, who works for a pharmacy in Pennsylvania, originally borrowed about $39,000 in 2007, but the interest rate on her loans ranged from 9% to 12%. She struggled to keep up with her payments over the years and worried that the debt would make home ownership impossible. Now, she said she is looking forward to a financial future with better possibilities.

Borrowers whose loans are canceled will receive notice from Navient along with refunds of any payments made after mid-2021.

The settlement also includes Arizona, California, Colorado, Connecticut, Delaware, Florida, Georgia, Hawaii, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Michigan, Minnesota, Missouri, Nebraska, Nevada, New Jersey, New Mexico, New York, North Carolina, Ohio, Oregon, Rhode Island, South Carolina, Tennessee, Vermont, Virginia, Washington, West Virginia and Wisconsin.

Information for this article was contributed by Steve LeBlanc and Gene Johnson of The Associated Press; and by Danielle Douglas-Gabriel of The Washington Post.

Print Headline: Student loans case settled for $1.85B


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