Navient Student Loan Settlement; Wisconsin part of $1.85 billion lawsuit

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Wisconsin Attorney General Josh Kaul announced Thursday that Navient, one of the nation’s largest student loan servicers, will provide relief totaling $1.85 billion to resolve allegations of unfair student loan servicing practices. and widespread misleading and abusive granting of predatory student loans.

The settlement, joined by a coalition of 39 attorneys general, resolves allegations that since 2009, despite saying it would help borrowers find the best repayment options for them, Navient has referred struggling student borrowers towards costly long-term forbearances instead of advising them on the benefits of more affordable income-driven repayment plans.

“A student loan officer cannot be permitted to engage in deceptive and predatory practices that add to the burden families face due to student loan debt,” Kaul said in a press release. “This resolution brings significant relief to many people who have been impacted by Navient’s actions.”

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Kaul filed the settlement as a proposal Consent Judgment and Complaint Thursday in Dane County Circuit Court. The settlement will require court approval.

As part of the settlement, Wisconsin will receive a total of just over $1.1 million in restitution payments for more than 4,165 federal borrowers. In addition, 953 borrowers will receive a total of more than $22 million in private loan debt forgiveness.

Wisconsin Attorney General Josh Kaul

As a result of the settlement, borrowers with Private Loan Debt Cancellation will receive notice from Navient by July 2022, along with reimbursement of any payments made on Private Loans canceled after June 30, 2021. Borrowers Federals eligible for a restitution payment of approximately $260 will receive a postcard in the mail from the settlement administrator later this spring.

Federal borrowers who qualify for relief under this settlement do not need to take any action other than updating or creating their studentaid.gov account to ensure that the United States Department of Education has its current address. For more information, visit NavientAGSettlement.com.

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Learn more about Navient settlement

According to the attorneys general, accrued interest due to Navient’s forbearance practices was added to borrowers’ loan balances, pushing borrowers further into debt. If the company had instead provided borrowers with the help it promised, according to a Wisconsin Department of Justice press release, income-driven repayment plans could have potentially reduced payments to $0 per month and offer other potential relief options to borrowers.

Navient also allegedly created predatory private loans at risk to students attending for-profit schools and colleges with low graduation rates, even though it knew a very high percentage of those borrowers would be unable to repay the loans. Navient reportedly made these risky subprime loans as “an incentive to get schools to use Navient as a preferred lender” for highly profitable “prime” federal and private loans, with no regard for borrowers and their families, many of whom were without the namely trapped in debts they could never repay.

Under the terms of the settlement, Navient will forgive the remaining balance on nearly $1.7 billion in subprime private student loan balances owed by nearly 66,000 borrowers nationwide. Additionally, Navient will pay $142.5 million to the attorneys general. A total of $95 million in restitution payments of about $260 each will be distributed to about 350,000 federal borrowers who have been placed in some type of long-term forbearance. Borrowers who will receive debt restitution or forgiveness span all generations: Navient’s harmful conduct has affected everyone, from students who enrolled in colleges and universities immediately after high school to mid-career students who dropped out after enrolling in an early-to-middle for-profit school. -2000s.

The settlement includes conduct reforms that require Navient to explain the benefits of income-tested repayment plans and to offer to estimate income-tested payment amounts before placing borrowers in optional forbearances. Additionally, Navient is to train specialists who will advise distressed borrowers on alternative repayment options and advise public service workers on Public Service Loan Forgiveness (PSLF) and related programs. The conduct reforms imposed by the regulations include prohibitions on compensating customer service agents in a way that incentivizes them to minimize the time spent advising borrowers.

The settlement also requires Navient to notify borrowers of the U.S. Department of Education’s recent announcement Possibility of limited derogation PSLF, which temporarily offers millions of eligible public servants the opportunity to benefit from previously ineligible repayment periods counted for loan cancellation, provided they consolidate into the direct loan program and file certificates of employment before October 31, 2022.

Until recently, Navient had a federal student loan administration contract owned by the US Department of Education, including a large portfolio of loans issued under the Direct Lending Program and a smaller portfolio of loans issued under the under the Federal Family Education Loans (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. However, Navient will continue to service federal student loans issued under the FFEL program that belong to private lenders, as well as non-federal private student loans.

The settlement was led by Pennsylvania, Washington, Illinois, Massachusetts and California, and was joined by the attorneys general of Arizona, Arkansas, Colorado, Connecticut, District of Columbia, from Delaware, Florida, Georgia, Hawaii, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Michigan, Minnesota, Missouri, Nebraska, Nevada, New Jersey, New -Mexico, New York, North Carolina, Ohio, Oregon, Rhode Island, South Carolina, Tennessee, Vermont, Virginia and West Virginia.

Because this compromise was reached before a civil action commenced, the requirements of Wisconsin Law 369 of 2017 do not apply.

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