For years, the student loan servicing company Navient allegedly encouraged student loan borrowers to enter costly long-term forbearance programs that pushed them further into debt, as well as take on private loans they couldn’t pay back, according to lawsuits filed by several states, and joined by 39 attorneys general.
Those claims were resolved through a settlement announced Thursday (January 13) affecting some 400,000 borrowers. Navient says it will cancel $1.7 billion in private student loan debt for 66,000 borrowers, as well as pay an additional $95 million in restitution to 350,000 people with federal loans. The former deal mostly focuses on students who took out loans to attend for-profit colleges between 2002 and 2014….
While Thursday’s settlement is significant for private student loan borrowers in debt, it extends to just a fraction of the estimated 12 million student loan borrowers Navient has served since 2014. Borrowers eligible for debt cancellation include those who took out private subprime student loans between 2002 and 2014 through the company’s predecessor, Sallie Mae.
Borrowers who were behind on payments for seven consecutive months prior to June 30, 2021 qualify to have their loans canceled, but those who are current on their loans do not.
Navient “expressly denies violating any law”, according to a statement from the company, in which their chief legal officer insists “these matters” were “based on unfounded claims,” but that settling them for $1.85 billion “allows us to avoid the additional burden, expense, time and distraction to prevail in court.”
But Mike Pierce, executive director of the Student Borrower Protection Center, tells Quartz that “This is a really big day for people with student debt.”
“Borrowers that are still struggling more than a decade later with loans, with the worst terms, after going to the worst schools, are finally debt free.”