Thousands of student loan borrowers are expected to receive long-sought debt relief through a $1.85 billion consent judgment announced Thursday with Navient, one of the nation’s largest student loan companies.
USA Today reports, if approved by a federal court, the agreement between the Delaware-based company and attorneys general for 39 states and the District of Columbia would resolve state allegations that Navient used unfair, deceptive and abusive student loan servicing practices in originating predatory loans.
The agreement would cancel the outstanding student loan balances of roughly 66,000 borrowers with private education loans that were started between 2002 and 2010, when Navient was known as Sallie Mae.
New York will specifically receive a total of about $6.8 million in restitution payments for more than 25,000 federal loan borrowers. Additionally, about 4,300 New York borrowers will receive over $110 million in private loan debt cancellation. New York state will also receive almost $1.2 million in cash.
As a result of the agreement, borrowers receiving private loan debt cancellation will receive a notice from Navient, along with refunds of any payments made on the cancelled private loans after June 30, 2021. Federal loan borrowers who are eligible for a restitution payment of approximately $260 will receive a postcard in the mail from the settlement administrator later this spring.
However, Navient denied any wrongdoing and said the company agreed to the settlement because the state lawsuits began more than eight years ago and were nowhere near the trial stage.
A separate U.S. Consumer Financial Protection Bureau lawsuit filed against Navient with similar allegations is continuing. The company has also denied wrongdoing in that case.
The settlement also includes reforms that would require Navient to explain the benefits of income-driven repayment plans before placing student loan borrowers into forbearance programs. The company also would be required to counsel borrowers who are now in public service jobs about a federal loan forgiveness program that could help eliminate their debts.