COLUMBUS, Ohio (WKBN) – Ohio is set to share in a $1.85 billion settlement involving one of the nation’s largest student loan servicers.
Navient has agreed to settle with Ohio, Pennsylvania and 37 other states over allegations that it engaged in predatory practices.
Ohio Attorney General Dave Yost and the other plaintiffs claimed that Navient practiced unfair and deceptive loan servicing by promising to help borrowers find affordable repayment options but instead steered financially strapped borrowers into costly, long-term repayment plans.
The main issue revolved around pushing borrowers into costly forbearance with interest accrual instead of income-driven repayment options, which would have reduced the student loan payment to $0 in many cases. It would have also provided interest subsidies, loan forgiveness after 20 to 25 years of qualifying payments or forgiveness after 10 years if the borrower worked in public service.
Navient admitted no guilt in the settlement saying that the decision to resolve the lawsuit, which they say was based on unfounded claims, was to avoid the “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,” said Navient’s Chief Legal Officer Mark Heleen.
The judgment is subject to court approval.
As part of the agreement, Ohio will receive $5.3 million in restitution payments to be shared among more than 19,800 borrowers who were Navient clients between 2009 and 2017.
“This settlement puts money back into the pockets of borrowers struggling to pay for college,” Yost said. “It’s also an important reminder for corporations that there are consequences for prioritizing profits over the public’s best interest.”
Approximately 13,000 Pennsylvania borrowers will receive $3.5 million in restitution payments and another 2,467 Pennsylvanians will receive $67 million in debt cancellation
In addition, 3,500 borrowers will receive cancellation of their private student loan debt totaling $81.8 million.
Navient is also accused of originating loans to students attending for-profit schools and colleges with low graduation rates, even though they knew that a “very high” percentage of the borrowers would not be able to repay the loans.
The settlement requires Navient to cancel the remaining balance on more than $1.7 billion in subprime private student loan balances owed by 66,000 borrowers nationwide since 2002. In addition, Navient will pay $142.5 million to the attorneys general.
Borrowers impacted by this settlement do not need to take action at this time. Borrowers receiving private loan debt cancellation will receive a notice from Navient by July 2022, along with refunds of any payments made after June 30, 2021, on the canceled private loans. Federal loan borrowers who are eligible for the estimated restitution payment of $260 will receive a postcard in the mail from the settlement administrator later in the spring.
Federal loan borrowers who qualify for relief under this settlement do not need to take any action except to update or create their studentaid.gov account to ensure that the U.S. Department of Education (DOE) has their current address. For more information, visit www.NavientAGSettlement.com.