Attorney General James Secures $1.85 Billion From Deceptive Student Loan Servicer Navient

Multi-state agreement removes US $ 1.7 billion in student debt
Recovers $ 95 million in refunds for thousands of students across the country

New York student loans will cancel more than $ 110 million in debt

NEW YORK – New York Attorney General Letitia James today has an agreement for $ 1.85 billion when it should have. A bipartisan coalition of 39 attorneys general negotiated the multi-state agreement, which will cancel $ 1.7 billion in private student loan debt and reclaim $ 95 million in reimbursement for thousands of students across the country.

“For too long, Navient has contributed to the national student debt crisis by deceptively luring thousands of students into yet another debt trap,” said Attorney General James. “Today’s billion dollar deal will bring relief and help getting back on their feet for thousands of borrowers in New York and across the country. Navient will no longer be able to fill its pockets at the expense of students trying to graduate. Student loan service providers operating through deception and misconduct will not be tolerated and will be held accountable by my office. ”

A cross-state research by Navient found that since 2009, the company has been channeling troubled student loan borrowers into costly, long-term forbearance rather than advising them on the benefits of more affordable, income-oriented repayment plans. The interest incurred as a result of Navient’s forbearance control practices was added to borrowers’ loan balances, adding further debt to the students. If the company had instead provided borrowers with the promised help, income-driven repayment plans could have reduced payments to as low as $ 0 a month, provided interest subsidies, and / or helped the remaining balance be waived after 20-25 years of qualification Payments (or 10 years for borrowers who qualify under the Public Service Loan Forgiveness Program [PSLF]).

The investigation found that Navient also made predatory subprime personal loans to students in for-profit schools and colleges with low graduation rates, even though the company knew a very high percentage of those borrowers would be unable to repay the loans. Navient allegedly created these risky subprime loans as an “incentive to get schools to use Navient as their preferred lender” for highly profitable government and “prime” private loans, regardless of borrowers and their families, many of whom are unwittingly entangled in debt could never repay it.

Under the terms of today’s agreement, Navient will distribute the remainder of nearly $ 1.7 billion in addition to a total of $ 95 million in reimbursement payments of approximately $ 260 each to approximately 350,000 federal borrowers who have been subject to certain types of long-term deferrals. Borrowers receiving a refund or debt relief span all generations as Navient’s harmful behavior impacted everyone from students who enrolled in colleges and universities immediately after high school to mid-career students who dropped out after enrolling in for-profit school early in the mid-2000s. Navient will also be forced to pay $ 142.5 million to the states under today’s agreement.

New York, in particular, will receive a total of about $6.8 million in reimbursement payments for more than 25,000 federal borrowers. In addition, approximately 4,300 New York borrowers will receive over $ 110 million in debt relief. New York State will also receive nearly $ 1.2 million in cash.

The agreement also includes behavioral reforms that require Navient to explain the benefits of income-based repayment plans and offer to estimate income-based payment amounts before borrowers are granted optional deferrals. In addition, Navient must train specialists to advise distressed borrowers on alternative repayment options and advise potentially eligible workers on PSLF and related programs. The behavioral reforms imposed by the agreement include bans on compensating customer service agents in ways that incentivize them to minimize the time it takes to advise borrowers.

Finally, the agreement provides for Navient to notify borrowers of the U.S. Department of Education’s recently announced option of the U.S. Department of Education’s limited PSLF waiver, which will temporarily allow millions of skilled public workers to have previously unqualified repayment periods count towards the loan waiver – provided that it is , they are consolidating themselves into the direct loan program and filing certificates of employment by October 31, 2022.

Under today’s agreement, borrowers who terminate personal loan debt will receive a notice from Navient along with the reimbursement of any payments made on the terminated personal loan after June 30, 2021, and will receive a postcard from the settlement administrator later this spring.

Federal Borrowers eligible for facility facilities under this Agreement do not need to do anything other than update or create their account to ensure that the U.S. Department of Education has their current address. Borrowers can find out about today’s contract online. Consumers who are confused or want to learn more about their student loans can do so at the National Consumer Law Center’s Student Loan Borrowers Assistance Project.

Until recently, Navient had a federal student loan servicing contract owned by the U.S. Department of Education, including a large loan portfolio under the Direct Loan program and a large loan portfolio under the Federal Family Education Loan (FFEL) program. On October 20, 2021, the U.S. Department of Education announced the transfer of this contract from Navient to AidVantage, a division of Maximus Federal Services, Inc private lenders as well as non-state private student loans.

Today’s consent judgment is accompanied by a lawsuit named Navient Corporation, Navient Solutions, LLC, Pioneer Credit Recovery, Inc., and General Revenue Corporation. The agreement also requires judicial approval.

In addition to Attorney General James in announcing today’s agreement, attorneys general of Arizona, Arkansas, California, Colorado, Connecticut, Delaware, Florida, Georgia, Hawaii, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan , Minnesota, Missouri, Nebraska, Nevada, New Jersey, New Mexico, North Carolina, Ohio, Oregon, Pennsylvania, Rhode Island, South Carolina, Tennessee, Vermont, Virginia, Washington, West Virginia, Wisconsin, and the District of Columbia.

For New York, this case was handled by Assistant Attorney General Stewart Dearing and former Assistant Attorney General Melissa O’Neill of the Consumer Frauds and Protection Bureau under the supervision of Assistant Office Manager Laura J. Levine and Office Manager Jane M. Azia. The Consumer Frauds and Protection Bureau is part of the Economic Justice Division overseen by Assistant Attorney General Chris D’Angelo and First Assistant Attorney General Jennifer Levy.

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