Settlement Provides $1.85 Billion Nationwide Relief to Students Who Obtained Navient Loans

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One of the nation’s largest student loan managers has agreed to provide $1.85 billion in loan debt relief to help settle a successful lawsuit brought by 38 states and the District of Columbia, authorities said Thursday. .

Under the terms of the settlement, Navient Corp and its subsidiary Navient Solutions LLC will make restitution payments of about $260 each to 350,000 borrowers, New Jersey Acting Attorney General Andrew J. Bruck said.

It will also cancel more than $1.7 billion in subprime private student loans owed by about 66,000 borrowers nationwide, he said.

The settlement includes about $57.2 million in debt relief for 2,040 New Jersey borrowers and $3.1 million in restitution payments to 11,522 other Garden State residents, Bruck said. The state itself will also receive $3 million, he said.

Borrowers who will receive restitution or forgiveness “represent all generations,” the attorney general said.

“Navient’s prejudicial conduct has impacted everyone from students who enrolled in colleges and universities immediately after high school to mid-career students who dropped out after enrolling in a purpose-built school. lucrative in the early 2000s,” he said.

Parents or grandparents who co-signed their children’s or grandchildren’s at-risk loans will also get relief, Bruck said.

“Student borrowers who thought college would be a path to success instead found themselves on a path to financial ruin as a result of Navient’s illegal conduct,” said Sean P. Neafsey, acting director of the New Jersey Consumer Affairs Division. “The settlement announced today holds Navient accountable for its impermissible conduct and provides meaningful financial relief to borrowers harmed by it.”

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REMARK: Borrowers in the affected 38 states and DC do not need to take any action to receive the benefits required under the settlement, authorities said. Consumers with private loan debt forgiveness will receive notice from Navient and receive reimbursement for any payments made after June 30, 2021, they said.

New Jersey borrowers who are eligible for a restitution payment will automatically receive a restitution check for approximately $260 from the Attorney General’s Settlement Administrator in mid-2022. To ensure that the Settlement Administrator can find you, federal borrowers who may be eligible for a Restitution Payment are encouraged to update their contact information in their studentaid.gov account or create an account if they don’t already have one.

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From 1989 to 2016, the average cost of earning a degree from a four-year college or university in the United States rose about eight times faster than the average salary, according to statistics.

In the face of soaring higher education costs, more than 44 million Americans have outstanding student loans now totaling more than $1.75 trillion nationwide, Bruck said.

The average New Jersey borrower has student debt of $35,730 — among the highest in the nation — according to some sources, the attorney general said.

Student loan servicers are a “critical link between borrowers and lenders,” he said. “In addition to managing borrowers’ accounts and processing their monthly payments, student loan servicers are responsible for helping borrowers in financial difficulty enroll in alternative repayment plans or request a change in loan terms. to lenders.”

Navient, formerly known as Sallie Mae, was one of the nation’s largest federal and private student loan managers until his partial exit from the company in September 2021, Bruck said.

At that time, his student loan origination and management business had severely abused young borrowers, deliberately tricking some of them into paying back more money than was owed at the time by lying. on amounts, he said.

Navient “has engaged in objectionable business practices, deceptive behavior and misrepresentation while servicing thousands of New Jersey consumer student loans over the past decade – increasing the company’s profits at detriment of distressed borrowers,” Bruck said.

The consequences of his conduct probably had the greatest impact on borrowers who could least afford it, he said.

A New York Federal Reserve study found borrowers in majority-black ZIP codes were more likely to borrow to fund their education, the attorney said. They also have higher average loan balances and defaults at nearly double the rate of majority-white ZIP code borrowers, the study found.

Among other discoveries:

  • borrowers who received Pell Grants – most of whom have household incomes below $40,000 – were five times more likely to default within 12 years;
  • borrowers whose parents did not attend college were more than twice as likely to default as borrowers whose parents attended college;
  • borrowers who started at for-profit colleges defaulted seven times more than those who attended public colleges.

New Jersey officials filed their lawsuit in October 2020 in Essex County, accusing Navient Corp. and Navient Solutions LLC of “repeatedly deceptive and impermissible tactics over the past decade” in violation of New Jersey consumer protection laws.

This included training Navient employees to “collect more than the overdue amount using language that misled borrowers about the amount they owed,” the division reportedly said. “Specifically, Navient sought to collect not only the overdue amount, but also the next month’s payment by misleadingly referring to the amount sought as the ‘current amount due’.

The result: Borrowers were forced to pay hundreds of dollars more than they had planned for individual payments.

The state suit also accused Navient of:

  • Steer financially distressed borrowers toward forbearance instead of repayment options and loan forgiveness programs, leading to unnecessary accrual of interest, adding interest to principal, and months of lost payments. timeliness that would otherwise count for loan cancellation;
  • Failing to inform borrowers of deadlines to recertify their eligibility for certain income-tested repayment plans – the consequences of which included increasing their monthly payments and causing other financial damage when their plans expired unnecessarily;
  • Incentivize borrowers to take out private student loans with a family member or someone else as a co-signer, making it extremely difficult to release the co-signer from any obligation.

A spokesperson for Navient, in turn, accused the state of “baseless allegations recycled” at the time.

On Oct. 20, 2021, Navient’s contract for servicing 5.6 million loans held by the U.S. Department of Education was transferred to Maximus/AidVantage, Bruck said Thursday. Following the completion of this transfer, Navient will continue to manage its existing portfolio of private student loans and loans inherited from the Federal Family Education Loan (FFEL) program issued prior to the end of the FFEL program in 2010, it said. he declares.

New Jersey borrowers who have issues with their student loans that they are unable to resolve with their student loan officers can file a complaint by calling 1-800-446-7467 or online by completing an official bank complaint form by clicking on “Consumer Assistance – Inquiries/Complaints” here: https://www.state.nj.us/dobi/consumer.htm

MORE INFORMATION: www.NavientAGSettlement.com

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