Navient, one of the largest student loan servicers in the United States, has reached a settlement agreement with 39 state Attorneys General. The lawsuit filed by the Attorneys General claimed that Navient was guilty of widespread unfair and deceptive student loan servicing practices, as well as abuses by making predatory student loans. The settlement will provide relief totaling over $1.85 billion. If you have used Navient, you may be able to claim some of that relief.

What did Navient allegedly do wrong?

Since Navient has settled, there has been no admission of wrongdoing on their part. Regardless, the settlement will resolve the claims made against them. The lawsuit alleges that since 2009 Navient encouraged borrowers who struggled to repay their loans to take long-term forbearances. These forbearances are very costly since the longer you have a balance and the higher the balance is, the more interest your lender can charge you. This is the case with almost every type of credit account. 

The lawsuit claims that instead of pushing forbearances, Navient should have informed borrowers of the benefits of more affordable repayment plans, such as repayment plans based on income. Income-based repayment plans are affordable when tailored to a borrower’s income. What’s more, sometimes having an income-based repayment plan can come with interest subsidies so that the interest isn’t stacking up and making the total amount to be repaid increase. There are also forgiveness programs that require a certain number of payments to be made, even if those payments are very small income-based repayments. While in forbearance, there are no payments to be applied to the forgiveness programs, so the loan only becomes a larger burden to the borrower as time goes on.

The lawsuit also alleges that Navient gave loans to students attending for-profit schools and colleges with low graduation rates even though it should have known that the student would be unlikely to graduate and, therefore, unlikely to repay the loan. Additionally, Navient was likely a “preferred” borrower for these schools since they agreed to make the loan even though it was unlikely that the borrower would be able to repay.

Relief for Borrowers

Navient will cancel the remaining balance on $1.7 billion in private student loans. This will affect over 66,000 borrowers nationwide. Additionally, Navient will pay a total of $95 million in restitution to individuals in some states. Roughly 350,000 Americans will receive restitution payments averaging $260 each. 

Although none of the 350,000 borrowers owed restitution live in Arkansas, you still may qualify for loan cancellation. Borrows include students who were enrolled in colleges and universities who immediately enrolled after high school to mid-career students who dropped out after enrolling in for-profit schools in the early to mid-2000s.

Does this affect me?

If you qualify for relief, you do not need to do anything other than make sure your contact information is up to date on your studentaid.gov account.

For more information, see the Arkansas Attorney General’s page at https://arkansasag.gov/news_releases/attorney-general-rutledge-announces-1-85-billion-settlement-with-student-loan-servicer-navient/

You can also learn more at navientagsettlement.com

AUTHOR: HELEN NEWBERRY, STAFF ATTORNEY FOR THE CENTER FOR ARKANSAS LEGAL SERVICES