Wisconsin AG announces $1.85 billion settlement with student loan servicer

Wausau Pilot & Review

Attorney General Josh Kaul announced today that Navient, known as one of the largest student loan providers, will provide a total of $ 1.85 billion in relief to allegations of widespread unfair and fraudulent student loan processing practices and abuse to clarify the granting of predatory student loans.

This settlement, which was joined by a coalition of 39 attorneys general, resolves claims that Navient has resulted in costly long-term forbearances rather than advising them since 2009, despite arguing that it would help borrowers find the best repayment options for them Advantages of cheaper income-oriented repayment plans.

“A student loan intermediary should not be allowed to engage in fraudulent and predatory practices that add to the stresses faced by families due to student loan debt,” said Attorney General Kaul. “This resolution offers significant relief to many who have been affected by Navient’s actions.”

Attorney General Kaul filed the settlement today as a proposed consent judgment and appeal in Dane County District Court. The settlement requires judicial approval.

According to the attorneys general, the interest accrued as a result of Navient’s forbearance control practices was added to borrowers’ loan balances, thereby adding further indebtedness to borrowers. If the company had instead provided borrowers with the promised help, income-driven repayment plans could potentially have reduced payments to as low as $ 0 per month, provided interest subsidies, and / or helped the balance be waived after 20-25 years of qualifying payments (or 10 years for borrowers who qualify under the Public Service Loan Forgiveness Program).

Navient also reportedly made predatory subprime personal loans to students attending for-profit schools and colleges with low graduation rates, although it knew that 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 encourage 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 were they could never repay it.

Under the terms of the settlement, Navient will cancel the remainder of nearly $ 1.7 billion in subprime private student loans owed by nearly 66,000 borrowers across the country. In addition, Navient will pay $ 142.5 million to the attorneys general. A total of $ 95 million in reimbursement payments of approximately $ 260 each will be distributed to approximately 350,000 federal borrowers who have received certain types of long-term deferrals. Borrowers receiving a refund or debt relief span all generations: Navient’s harmful behavior impacted everyone from college and university students who enrolled in college and university immediately to mid-career students who dropped out after enrolling in a for-profit school in the early to mid-2000s.

As part of the settlement, Wisconsin will receive a total of $ 1,110,265 in refund payments for more than 4,165 federal loan borrowers. Additionally, 953 borrowers will receive a total of $ 22,776,612 in personal loans.

The comparison 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 placed on optional deferrals. In addition, Navient must train specialists to advise distressed borrowers on alternative repayment options and advise public service workers on Public Service Lending (PSLF) and related programs. The behavioral reforms imposed by the settlement include bans on compensating customer service agents in ways that incentivize them to minimize the time it takes to advise borrowers.

The settlement also obliges Navient to notify borrowers of the U.S. Department of Education’s recently announced PSLF Restricted Waiver option, which temporarily gives millions of skilled public service workers the ability to count previously unqualified repayment deadlines against the loan waiver – provided They are consolidating into the Direct Loan Program and Submitting Certificates of Work by October 31, 2022.

As a result of today’s settlement, borrowers who terminate personal loans will receive a notice from Navient by July 2022 and refunds of all payments made on the terminated personal loans after June 30, 2021. Federal loan borrowers eligible for a refund payment of approximately $ 260 will receive a postcard from the estate manager in the mail later this spring.

Federal Loan Borrowers Eligible for Facilitation Under this Settlement are not required to take any action other than to update or create their studentaid.gov account to ensure that the Department of Education has their current address. More information is available at www.NavientAGSettlement.com.

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 smaller 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.

Because this compromise was reached prior to the commencement of a civil lawsuit, the requirements of Wisconsin Act 369 of 2017 do not apply.

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