Navient Settles Deceptive Student Loans Lawsuit for $1.85B (Unpublished)
Source: Photo by Ian Waldie/Getty Images / Photo by Ian Waldie/Getty Images[/caption]
Student loan servicer, Navient, gets caught in the act of being predatory.
Pennsylvania Attorney General Josh Shapiro just announced that Navient, the nation's largest student loans supplier, will be handing money back. Navient is going to pay back $1.85 billion to resolve allegations of "widespread unfair, deceptive, and abusive student loan servicing practices and abuses in originating predatory student loans." The claims of the settlement date back to 2009 and it took a coalition of 39 attorneys general to get the job done.
AG Josh Shapiro said the following to describe Navient's wrongdoing.
Navient repeatedly and deliberately put profits ahead of its borrowers – it 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.
Today's settlement corrects Navient's past behavior, provides much needed relief to Pennsylvania borrowers, and puts in place safeguards to ensure this company never preys on student loan borrowers again.
Navient "expressly denies violating any law" as they mentioned in their press release.
Navient's Chief Legal Officer, Mark Heleen, has expressed the reason for the company's decision to settle the case that they deny is true.
The company’s decision to resolve these matters, which were based on unfounded claims, allows us to avoid the additional burden, expense, time and distraction to prevail in court.
Navient is and has been continually focused on helping student loan borrowers understand and select the right payment options to fit their needs.
In fact, we’ve driven up income-driven repayment plan enrollment and driven down default rates, and every year, hundreds of thousands of borrowers we support successfully pay off their student loans.
Nonetheless, Navient is now legally responsible for cancelling the loan balances of 66,000 borrowers.
That includes certain qualifying private education loans that were originated largely between 2002 and 2010, and later defaulted and charged off. That results in $1.7 billion in debt cancellation and $95 million in restitution. The company has also booked an after-tax charge of approximately $170 million due to the agreement. The value of the canceled defaulted loans is approximately $50 million.
Not to mention, Navient is also going to have to make a one-time donation of approximately $145 million to each state affected. A portion of that payment will reimburse the states for their costs with the remaining funds. Which will be used and determined by each state to provide payments to certain student loan borrowers.
Student loan borrowers that are eligible should be receiving a notice from Navient by July 2022. Refunds from any payment made after July 30, 2021 will be included as well. Restitution funds will be handed out to about 350,000 eligible federal student loan borrowers. During the springtime, they'll be notified of their eligibility for a $260 restitution payment through a mailed postcard. In context for Pennsylvanians, approximately 13,000 borrowers will receive $3.5 million in restitution payments and another 2,467 Pennsylvanians will receive $67 million in debt cancellation.
For those who aren't familiar with Navient, may be familiar with Navient's parent company Sallie Mae.
In 2014 Sallie Mae split its identity into two forms, Sallie Mae Bank and Navient. This isn't the first time Sallie Mae has been in legal battles with claims of predatory and stealing natures of practice. Back in 2007, then New York Attorney General Andrew Cuomo fought several student loan providers, including Sallie Mae. Andrew Cuomo and his team also settled their case with Sallie Mae, with a $2 million payout to a fund devoted to educating college-bound students about their loan options.
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