The Navient settlement releases claim for injunctive relief and the right to collect aggregate damages but retain the right to bring individual lawsuits. It also dismissed all claims except for New York General Business Law, which likely covers borrowers in New York. This settlement is not the end of Navient’s shady business practices. However, it is a major setback for consumers who took out private student loans from the company.
Navient to cancel $1.7 billion in private student loans
The federal government has awarded a settlement to student loan servicer Navient, which has agreed to cancel $1.7 billion in private student loans. The settlement includes a $260 restitution payment, non-subprime private student loans, and select for-profit schools. The terms of the settlement aren’t known yet, but it’s expected to cover at least 66,000 borrowers. Navient will be obligated to make this payment by June 30, 2021.
Despite the settlement, Navient continues to deny the allegations and defend its practices. In the meantime, the company’s executives continue to push back against the claims. Still, student loan advocates are applauding the settlement. In addition to the cancellation of private student loans, Navient will have to pay $145 million to states. The company will also have to repay its former federal loan portfolio. But that’s only the tip of the iceberg.
The settlement has brought to light the company’s predatory lending practices. Until recently, Navient was known as Sallie Mae. It used predatory lending practices to lure students away from federal loans by offering them private student loans. Moreover, the company tended to provide degrees that were not valuable, so the private loans served as a way to cover the gap. The settlement, however, does not cover the millions of students who defaulted on their private loans.
Pay $95 million in restitution to approximately 350,000 federal student loan borrowers
Navient has agreed to pay $95 million in restitution to approximately three-fourths of the estimated 350,000 federal student loan borrowers in the state. Most of the borrowers were placed into forbearance plans that pushed them deeper into debt. The restitution plans were not as affordable as income-based repayment plans. Most of the borrowers were enrolled in for-profit colleges, including Corinthian Colleges. This case has caused many to consider whether to get their education elsewhere.
Navient has agreed to settle lawsuits by approximately three-fourths of federal student loan borrowers. The settlement will help these borrowers regain control of their financial lives. Thousands of borrowers have been struggling to make ends meet because they were unable to make payments on their loans. While Navient has agreed to settle the lawsuit, many still have unpaid debts and are seeking restitution from the company.
Under the agreement, Navient must send postcards to borrowers that inform them of the PSLF limited waiver opportunity. This offers free debt forgiveness to qualifying public service workers, but only if they consolidate their loans and file employment certifications by October 31, 2022. Navient must also inform borrowers that their private loan payments have been canceled after June 30, 2021. Borrowers should look out for these letters as they begin receiving refunds.
Advise borrowers about PSLF limited waiver opportunity
The Department of Education has announced that borrowers can get credit for past payments through the PSLF limited waiver opportunity. Interested borrowers must consolidate non-qualifying loans into Direct Loans and complete the PSLF employment certification form. However, borrowers must consolidate their non-qualifying loans before the deadline to avoid losing access to their payment records. To take advantage of this limited waiver opportunity, borrowers should contact their student loan servicers to discuss their options.
The HEROES Act of 2003 granted the Department of Education special authority to expand the PSLF program. The PSLF program was created in response to the pandemic. The Biden Administration expanded this program to provide loan forgiveness to more public servants. However, it has faced several challenges along the way. Some borrowers chose repayment plans that were not PSLF-eligible, had the wrong type of student loan, or did not have enough service hours to qualify for loan forgiveness.
For borrowers to qualify for the PSLF program, a lender must advise them that the criteria for qualifying are incredibly strict. This means that a borrower must have a certain type of loan, have made at least one qualifying payment since 2010, and be enrolled in a specific loan repayment plan. Furthermore, they must have made at least one payment every month to be eligible for the PSLF program. These strict criteria meant that more than 99% of PSLF applications were rejected due to the stringent requirements.