Student loan lender, Navient, to repay $1.7 billion in debt cancellation lawsuit
Pennsylvania Attorney General Josh Shapiro announced a student loan settlement after suing Navient over ‘deceptive’ lending practices.
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Navient, a notable student loan provider, was ordered to settle $1.7 billion in debt cancellation for allegations of abusive practices to over 66,000 borrowers.
Pennsylvania Attorney General Josh Shapiro on Thursday, Jan. 13, said the entire deal is worth $1.85 billion in reimbursements from Navient.
“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,” said Shapiro in a statement.
A total of 39 state attorney generals joined in efforts to resolve student loan claims dating back to 2009. They argued that Navient 'deceptively’ led borrowers who struggled to repay their loans into long-term forbearances.
The lawsuit found that Navient was targeting students at for-profit schools and universities with low graduation rates, aware that most would be unable to pay back the student loans.
Shapiro said Navient allegedly used a pair of schemes to lure colleges into trusting its services.
“The first scheme involved Navient issuing subprime private loans to borrowers they knew could not pay the money back – similar to the mortgage crisis in 2008. The second scheme we uncovered was Navient’s drive to mislead borrowers into forbearances,” he said.
As part of the settlement, Navient will reimburse $142.5 million to about 350,000 lenders. According to officials, Navient issued the loans between 2002 to 2014.
Navient, in addition, allegedly failed to inform public-sector workers that their loans were eligible for forgiveness.
Borrowers are told they will receive notice of their student loan cancellation from Navient by July 2022, and also a refund for payments made after June 30, 2021.
Navient on Thursday, fully denied the allegations in a company press release, stating they did not violate any law, or cause borrowers harm.
“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,” said Navient’s Chief Legal Officer Mark Heleen.