$110M In Navient Student Loan Debt Canceled In New York: AG

NEW YORK — Navient, a student loan company, has been ordered to pay back more than $1.7 billion in debt cancelation nationwide for deceptive practices, including $110 million to around 4,300 New York student borrowers, New York Attorney General Letitia James announced on Thursday. The company also owes $95 million in restitution nationally following the 39-state settlement.

"For too long, Navient contributed to the national student debt crisis by deceptively trapping thousands of students into more debt," James stated. "Today’s billion-dollar agreement will bring relief to thousands of borrowers in New York and across the nation and help them get back on their feet. Navient will no longer be able to line its pockets at the expense of students who are trying to earn a college degree. Student loan servicers that operate through deception and wrongdoing will not be tolerated and will be held accountable by my office."

The remaining balance on student debt will be canceled for nearly 66,000 borrowers across the country, according to the settlement. Meanwhile, restitution payments of $260 each will be sent to about 350,000 federal loan borrowers who were qualified for certain types of long-term forbearances.

If you will have your loans canceled, you will receive a notice from Navient by July 2022, authorities said. Refunds on any payments of the canceled loans made after June 30, 2021, will also be refunded. No action is required from loan borrowers to receive these funds.

A multistate investigation into Navient found that, since 2009, the company has been steering struggling student loan borrowers into costly, long-term forbearances instead of counseling them about the benefits of more affordable income-driven repayment plans, the AG said. The interest that built up because of Navient’s forbearance steering practices was added to the borrowers’ loan balances, pushing students further into debt, James said. Had the company instead provided borrowers with the help it promised, income-driven repayment plans could have reduced payments to as low as $0 per month, provided interest subsidies, and/or helped attain forgiveness of any remaining balance after 20 to 25 years of qualifying payments; or 10 years for borrowers qualified under the Public Service Loan Forgiveness Program; officials said.

The investigation found that Navient also provided predatory, subprime, private loans to students attending for-profit schools and colleges with low graduation rates, although the company knew that a very high percentage of those borrowers would be unable to repay the loans, the AG's Office said. Navient 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 thinking of borrowers and families who did not know they would never be able to repay the debts, prosecutors said.

In addition to the $110 million earmarked for New York student borrowers, the state is set to receive $6.8 million in restitution payments for more than 25,000 federal loan borrowers, along with almost $1.2 million in cash.

Other states that joined on to the settlement were Arizona, Arkansas, Colorado, Connecticut, the District of Columbia, Delaware, Florida, Georgia, Hawaii, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Michigan, Minnesota, Missouri, Nebraska, Nevada, New Jersey, New Mexico, North Carolina, Ohio, Oregon, Pennsylvania, Rhode Island, South Carolina, Tennessee, Vermont, Virginia, West Virginia and Wisconsin.