Student loan company Navient to forgive $1.7 billion in debt in settlement

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Student loan company Navient has agreed to forgive $1.7 billion in non-public scholar loans and pays $95 million in restitution after a lawsuit accused the company of steering struggling debtors into extra debt, officers introduced Thursday.

New York Attorney General Letitia James claimed in a lawsuit — filed concurrently with the settlement — that since 2009, the company deceived hundreds of financially struggling prospects with federal debt in order that they might go for costly, long-term forbearance plans as a substitute of informing them of extra inexpensive choices.

In the top, the debtors ended up with much more debt relatively than what the income-driven compensation plans variously supplied, together with reducing month-to-month funds to as little as $0, subsidies on curiosity and eventual scholar loan forgiveness after 20 to 25 years, the swimsuit claims.

Navient building
Navient didn’t admit to wrongdoing however pays the $95 million to 350,000 federal loan debtors.
AP

The AG additionally accused Navient of giving college students of universities with low commencement charges subprime non-public loans figuring out that many of the college students wouldn’t find a way to repay them. Navient used the subprime loans in an effort to get the colleges to select Navient as their most popular lender, the swimsuit claims.

Without admitting any wrongdoing, Navient settled the swimsuit, agreeing to forgive $1.7 billion in subprime non-public loans for 66,000 debtors nationwide. The company may even pay again $95 million to 350,000 federal loan debtors — or $260 every — who have been allegedly steered into the costly forbearance plans.

The company may even pay $142.5 million to completely different states — because the settlement was negotiated with a coalition of 39 different state attorneys common.

Navient
Navient debtors ended up with much more debt relatively than what the compensation plans supplied.
SOPA Images/LightRocket through Gett

Navient additionally agreed to reform its practices by telling debtors about income-driven compensation choices earlier than inserting them on forbearance.

“Navient will no longer be able to line its pockets at the expense of students who are trying to earn a college degree,” James mentioned in an announcement.

In the settlement, Navient denied the claims.

Navient
New York Attorney General Letitia James known as out Navient for deceiving hundreds of financially struggling prospects.
LightRocket through Getty Images

“The company’s decision to resolve these matters, which were based on unfounded claims, allows us to avoid the additional burden, expense, time and distraction to prevail in court,” Navient chief authorized officer Mark Heleen mentioned in a ready assertion. “Navient is and has been continually focused on helping student loan borrowers understand and select the right payment options to fit their needs.”

“In fact, we’ve driven up income-driven repayment plan enrollment and driven down default rates, and every year, hundreds of thousands of borrowers we support successfully pay off their student loans,” Heleen continued.

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