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Navient, formerly one of the largest student loan servicers in the United States, on Thursday agreed to a settlement with Pennsylvania and dozens of other states to forgive more than $1.8 billion in student loans and disburse nearly $100 million in compensation to borrowers.
The deal comes after Pennsylvania Attorney General Josh Shapiro filed a lawsuit against Navient for issuing risky predatory student loans, as well as tricking borrowers into long-term forbearances that go to l against the company’s promise to find the best possible reimbursement options.
These forbearers had payments as low as $0 stacked on interest, even when other options, such as income-driven repayment plans, might have resulted in a lower balance for borrowers.
The settlement will affect hundreds of thousands of people living in 38 states and Washington, D.C. As part of the settlement, Navient is canceling remaining student loan balances for more than 66,000 borrowers, totaling $1.7 billion.
Additionally, more than 350,000 people in 32 states who took out federal student loans through Navient will each receive $260 in restitution payments, to be paid this spring. In Pennsylvania alone, more than 15,000 people will receive more than $70 million in restitution payments and student debt forgiveness, Shapiro’s office said.
A list of states that participated in the lawsuit is available on the settlement’s website.
People who had student loans through Navient welcomed the news.
One woman, Ashley Hardin, told The New York Times that she took out more than $100,000 in Navient loans to attend the now-defunct Brooks School of Photography in California and was paying more than $1,000 per month in student loan fees. She hopes the debt will be cleared as part of the settlement.
“It’s been a long time coming and justice has definitely been served,” she told the Time.
If you are one of the private borrowers concerned, you have nothing to do. You will receive notice of cancellation of your loan by July, as well as a refund of any payments you made after June 2021, according to Shapiro’s office.
If you are one of the federal borrowers, you will receive a postcard in the mail this spring, the news release announcing the settlement says. The only thing you need to do is make sure your address is updated on the Department of Education’s financial aid website.
More information is available on the settlement website.
“Navient repeatedly and deliberately put profits ahead of its borrowers – it engaged in deceptive and abusive practices, targeted students it knew would struggle to repay their loans, and imposed a burden unfair to people trying to improve their lives through education,” Shapiro said. in a press release announcing the settlement.
“Today’s settlement corrects Navient’s past behavior, provides much-needed relief to borrowers in Pennsylvania, and puts safeguards in place to ensure this company never preys on student borrowers again.”
Despite the settlement, Navient continues to deny any wrongdoing.
“The company’s decision to resolve these matters, which were based on unsubstantiated claims, allows us to avoid the additional burden, expense, time and distraction that prevails in court,” said the General Counsel. of Navient, Mark Heleen, in a statement.
Navient was previously the federal student loan processor for over 5.6 million people. But in October, the company transferred all of its federal loans to Maximus, a government services contractor that generates billions in revenue each year. These loans are now administered under the name Aidvantage.
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