Navient to cancel 66,000 loans worth $1.7 billion to resolve predatory loan applications

Jan 13 (Reuters) – U.S. student loan giant Navient Corp (NAVI.O) will write off $1.7 billion in debt owed by 66,000 borrowers and reward another 350,000 to resolve allegations from 38 U.S. states and the District of Columbia that the company is preying on customers and steered many into expensive refund plans.

Thursday’s national settlement ends investigations and lawsuits into Navient’s practices dating back to 2009, when the company was known as Sallie Mae.

Navient will pay an additional $142.5 million to the states, including $95 million to injured borrowers, bringing the total settlement to approximately $1.85 billion, according to the states.

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In a statement, Navient denied breaking any laws or causing harm to borrowers, saying the case was “based on unsubstantiated allegations.”

The states alleged that Navient pushed struggling student borrowers into costly long-term repayment holidays instead of advising them on the benefits of more affordable, income-driven repayment plans, the states said.

The company also made predatory loans to private borrowers they knew would struggle to repay, they said.

Pennsylvania Attorney General Josh Shapiro, whose state was among those to be settled, said Navient was preventing thousands of borrowers from buying homes, starting businesses and raising families.

“Navient knew that people relied on their loans to improve their lives and the lives of their children,” Shapiro told a news conference. “Instead of helping them, they organized a multi-billion dollar scam.”

Navient will cancel approximately $1.7 billion in subprime private student loan balances owed by approximately 66,000 borrowers. It will also give more than 350,000 borrowers who have been placed on long-term repayment suspension $260 each.

Navient will notify borrowers whose private loans are canceled by July and refund payments after June 30, the states said. Borrowers eligible for restitution will be notified by mail this spring.

“For many borrowers, getting rid of this debt will be life changing,” Massachusetts Attorney General Maura Healey said at the press conference.

The settlement comes as President Joe Biden’s Democratic administration aims to bring the country’s student loan crisis under control and step up scrutiny of private loan providers.

Settlement states have accused Navient of encouraging struggling student borrowers to delay payments instead of advising them on the benefits of affordable, income-driven repayment plans. This has resulted in interest accumulating on borrowers’ loan balances, pushing them further into debt, the states said.

Navient has also been accused of making predatory private loans at risk, often to attend for-profit schools with low graduation rates, which the Wilmington, Delaware-based company knew borrowers would struggle to afford. to reimburse.

The states said Navient used these practices to incentivize colleges and universities to treat it as a “preferred” lender for cost-effective “prime” federal and private loans.

In a statement, Navient chief legal officer Mark Heleen said the settlement would save the company the time, cost and distraction of further litigation.

In 2014, Sallie Mae spun off Navient from its private education lending business, now known as SLM Corp (SLM.O).

By late afternoon, shares of Navient were up 0.09% at $21.91.

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Reporting by Chris Prentice in Washington and Jonathan Stempel in New York; Editing by Diane Craft and Jonathan Oatis

Our standards: The Thomson Reuters Trust Principles.

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