Californians will receive hundreds of millions of dollars in student loan relief in a multi-state settlement against one of the nation’s largest private lenders.
California and dozens of other states have settled with Navient over allegations of improper lending and collection practices. Navient will offer $95 million in restitution to borrowers and cancel $1.7 billion in private debt for borrowers across the country.
About $11.5 million of direct restitution and $261 million of private debt forgiveness will go to Californians, according to the California attorney general’s office.
Navient will also have to follow strict lending and collections guidelines, including requiring appeals officers to outline how borrowers can reduce or stop payments, training specialists to work with at-risk borrowers, and limiting certain late fees.
In announcing the settlement, California Attorney General Rob Bonta called on the federal government to act on student loan debt.
“There is a $1.7 trillion student debt crisis in our country,” Bonta said at a settlement news conference on Thursday. “We need the companies responsible for servicing federal loans to do better. And we need decisive action from Congress and the Department of Education to tackle the full extent of this problem.
Several states filed suit against the lender in 2017; California joined in 2018.
Bonta’s office said Navient, which was formed when lender Sallie Mae split into two entities in 2014, violated California law by pushing borrowers into expensive long-term payment plans that increased costs. interests. Navient also misled consumers by withholding information about income-based reimbursement programs, among other things, attorneys general said.
Navient has denied the allegations, with its chief legal officer saying the company “focuses and has continually focused on helping student borrowers understand and select the right payment options to meet their needs.”
“The company’s decision to resolve these matters, which were based on unsubstantiated claims, allows us to avoid the additional burden, expense, time and distraction that prevails in court,” the director said Thursday. Navient Legal, Mark Heleen.
“In fact, we’ve increased enrollment in income-contingent repayment plans and reduced default rates, and every year hundreds of thousands of borrowers we support successfully repay their student loans,” Heleen added.
About 357,000 borrowers will receive $260 in restitution, including 43,000 Californians. About 66,000 borrowers will have their private loan debt erased, including more than 7,400 Californians.
Navient will notify people whose debt is canceled and refund money for payments made after June 30, 2021, Bonta’s office said, direct consumers to a website dedicated to the payment. Those eligible for the restitution payment will receive a postcard from the Attorney General’s Settlement Administrator this spring. Eligible borrowers will receive a check, Bonta said, and need not take action.
Most borrowers would have taken private student loans from the company when it was still Sallie Mae between 2002 and 2010, according to Navient.
Among other administrative changes to strengthen payment assistance information, Navient is to notify borrowers of loan forgiveness through programs in the Cancellation of civil service loans program, which offers assistance to public servants in the non-profit or government sectors.
Many of those affected by Navient’s lawsuit took out loans to attend for-profit schools, another target of several lawsuits Bonta has filed.
“Many of us have worked hard to achieve our college dreams,” Bonta said. “But for too many people, those dreams have become horrible nightmares trapped by crushing student debt.”
Bonta and other state attorneys general have sued the United States Department of Education for defaulting on student loans who attended for-profit and defunct colleges, relaxing regulations for these institutions, and changes to borrower regulations.
Attorneys general from the following 38 states plus the District of Columbia were part of the lawsuit against Navient: Arizona, Arkansas, California, Colorado, Connecticut, Delaware, District of Columbia, Florida, Georgia, Hawaii, Iowa, Illinois, Indiana, Kansas, Kentucky , Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Missouri, Nebraska, Nevada, New Jersey, New Mexico, New York, North Carolina, Ohio, Oregon, Pennsylvania, Rhode Island, South Carolina, Tennessee, Vermont, Virginia, Washington, West Virginia and Wisconsin.
This story was originally published January 13, 2022 9:59 a.m.