January 14, 2022
Settlement includes $1.6 billion in debt
cancellation and $95 million in restitution; Nevada borrowers will receive over
$18 million in relief.
Carson City, NV –
Attorney General Aaron D. Ford has announced that Navient, one of the nation’s
largest student loan servicers, will provide relief totaling $1.7 billion to
resolve allegations of widespread unfair and deceptive student loan servicing
practices and abuses in originating predatory student loans.
This settlement resolves claims from 2009 onward that Navient steered
struggling student loan borrowers into costly long-term forbearances instead of
counseling them about the benefits of more affordable income-driven repayment
plans, despite representing that it would help borrowers find the best
repayment options for them.
“This settlement provides relief to thousands of Nevada students who were
victims to Navient’s misrepresentations and predatory practices,” said AG Ford.
“This settlement also serves as a caution to other loan servicers that these
practices will not be tolerated, and it is their responsibility to assist
borrowers in an honest and professional manner.”
According to the attorneys general, the interest that accrued because of
Navient’s forbearance steering practices was added to the borrowers’ loan
balances, pushing borrowers further in debt. Had the company provided borrowers
with the help it promised, income-driven repayment plans could have potentially
reduced payments for those borrowers to as low as $0 per month, provided
interest subsidies and/or helped attain forgiveness of any remaining balance
after 20-25 years of qualifying payments (or 10 years for borrowers qualified
under the Public Service Loan Forgiveness Program).
Navient also allegedly originated predatory subprime private loans to
students attending for-profit schools and colleges with low graduation rates,
even though it knew that a very high percentage of such borrowers would be
unable to repay the loans. Navient allegedly made these risky subprime loans as
“an inducement to get schools to use Navient as a preferred lender” for
highly-profitable federal and “prime” private loans, without regard for borrowers
and their families, many of whom were unknowingly ensnared in debts they could
Under the terms of the settlement, Navient will cancel the remaining
balance on more than $1.6 billion in subprime private student loan balances
owed by approximately 62,000 borrowers nationwide. In addition, a total of $95
million in restitution payments of about $260 each will be distributed to
approximately 350,000 federal loan borrowers who were placed in certain types
of long-term forbearances. Borrowers who will receive restitution or debt
cancellation span all generations: Navient’s harmful conduct impacted everyone
from students who enrolled in colleges and universities immediately after high
school to mid-career students who dropped out after enrolling in a for-profit
school in the early to mid-2000s.
As part of the settlement, Nevada will receive a total of $1,053,752 in
restitution payments for 3,952 federal loan borrowers. Additionally, 592 Nevada
borrowers will receive a total of $17,140,858 in private loan debt
The settlement also includes requirements that require Navient correct and
maintain its conduct in the future. These include requirements that Navient
explain the benefits of income-driven repayment plans and to offer to estimate
income-driven payment amounts before placing borrowers into optional
forbearances, and train specialists who will advise distressed borrowers
concerning alternative repayment options and counsel public service workers
concerning Public Service Loan Forgiveness (PSLF) and related programs. The
conduct reforms imposed by the settlement also include prohibitions on
compensating customer service agents in a manner that incentivizes them to
minimize time spent counseling borrowers.
The settlement also requires Navient to notify borrowers about the U.S.
Department of Education’s recently announced PSLF limited waiver opportunity,
which temporarily offers millions of qualifying public service workers the
chance to have previously non-qualifying repayment periods counted toward loan
forgiveness — provided that they consolidate into the Direct Loan Program and
file employment certifications by Oct. 31, 2022.
As a result of today’s settlement, 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
Federal loan borrowers who qualify for relief under this settlement do not
need to take any action except update or create their studentaid.gov account to
ensure U.S. Department of Education has their current address. For more
information, visit NavientAGSettlement.com.
Today’s settlement was led by Pennsylvania, Washington, Illinois,
Massachusetts, and California, and was joined by attorneys general in Arizona,
Arkansas, Colorado, Connecticut, Delaware, Florida, Georgia, Hawaii, Indiana,
Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Michigan, Minnesota,
Missouri, Nebraska, New Jersey, New Mexico, New York, North Carolina, Ohio,
Oregon, Rhode Island, South Carolina, Tennessee, Virginia, West Virginia,
Wisconsin and the District of Columbia.
The proposed consent judgment and complaint are attached.