Navient, one of the largest student loan servicers, will foreclose on $1.7 billion in private student loans after reaching a settlement with 39 states.
The settlement, announced on Thursday, came amid allegations that the lender had extended loans to millions of borrowers who were unlikely to be able to repay them. The agreements resolve all six outstanding state lawsuits against Navient, company officials said.
The loans are private loans, which means they are not guaranteed by the federal government. As part of the settlement, the company will make a one-time payment to the states of approximately $145 million.
Nearly 66,000 borrowers are expected to repay their loans under the $1.85 billion deal.
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“At last, student loan borrowers who have been forced to shoulder the burden of dangerous and predatory private student loans originated by Sallie Mae and owned by Navient will finally be debt free,” said Mike Pierce, executive director of Student Borrower Protection Center .
(Sallie Mae is Navient’s predecessor company.)
Navient denies breaking the law.
“The Company’s decision to resolve these matters, which were based on unsubstantiated claims, allows us to avoid the added burden, expense, time and distraction of standing up in court,” said Mark Heleen, Chief Legal Officer by Navient, in a statement.
As the cost of higher education rises, more Americans are turning to private student loans.
The personal student loan market has grown more than 70% over the past decade and is worth approximately $130 billion, according to a recent report by the Student Borrower Protection Center.
By the end of 2019, Americans owed more personal student loans than past due medical debt or payday loans.