On Jan. 13, California Attorney General Rob Bonta announced a multistate settlement against Navient, one of the largest student loan servicers in the country, to resolve allegations of misconduct in the servicing and collection of federal student loans.
The settlement, which is subject to court approval, includes $95 million in restitution for student loan borrowers and $1.7 billion in private student loan debt cancellation, including $11.5 million in direct restitution and $261 million in debt cancellation for California borrowers.
Many of these borrowers took out private student loans to attend for-profit schools with low graduation and job-placement rates. As part of the settlement, Navient will be required to comply with terms governing student loan servicing.
Rob Bonta
Bonta called the settlement “a victory for student loan borrowers in California and in our sister states who were exploited by Navient and trapped by poor servicing conduct into expensive loans that they couldn’t afford.”
He added, “Navient has been one of the worst actors in the student loan servicing market, and this settlement is a step toward accountability, providing direct relief for many of our most vulnerable student borrowers. The broader fight, however, is far from over. There is a $1.7 trillion student loan debt crisis in this country — and we need decisive action from Congress and the Department of Education to solve it.”
In June 2018, the California Attorney General’s Office filed a lawsuit alleging that Navient violated California’s Unfair Competition Law and False Advertising Law by steering vulnerable borrowers into costly forbearances and failing to advise them on the benefits of income-driven repayment programs.
The settlement resolves these allegations and requires Navient to make $95 million in restitution payments of about $260 each to 357,000 harmed consumers, including 43,000 Californians.
Navient will also cancel more than $1.7 billion in subprime private student loans owed by approximately 66,000 borrowers nationwide. Californians will receive around $261 million of that debt cancellation, going to approximately 7,400 borrowers.
Borrowers who will receive restitution or forgiveness span all generations: Navient’s harmful conduct impacted everyone from students who enrolled in colleges and universities immediately after high school to mid-career students who dropped out after enrolling in a for-profit school in the early-to-mid 2000s.
Consumers do not need to take any action to receive the benefits required under the student loan settlement.
Consumers receiving private loan debt cancellation will receive a notice from Navient, and they are to receive refunds of any payments made after June 30, 2021.
Consumers who are eligible for a restitution payment will receive a postcard in the mail from the Attorney General’s settlement administrator in spring 2022. More information is at www.NavientAGSettlement.com.
This settlement against Navient also includes terms designed to prevent future misconduct. Navient is to:
- Ensure that call agents discuss the benefits of income-driven repayment with all borrowers seeking to lower or stop their payments;
- Create a new cadre of repayment specialists trained to advise at-risk borrowers;
- Stop compensating call agents in a way that encourages them to handle calls quickly, and instead ensure agents give thorough and accurate information to borrowers;
- Implement changes to payment-processing procedures that will benefit borrowers;
- Limit or reduce fees for late payments or entering forbearances; and
- Improve its billing statements and other communications to better inform borrowers of their rights and obligations.
Navient must notify borrowers of the Department of Education’s important changes to the Public Service Loan Forgiveness program, which offers millions of qualifying public servants a waiver that may count past payments, or previously non-qualifying periods of repayment, toward loan forgiveness.
Bonta encourages all Californians working in the government or non-profit sectors to review the PSLF website to determine whether they might qualify for student loan forgiveness. Borrowers seeking loan forgiveness under the Department of Education’s recent changes must take action by Oct. 31, 2022.
Bonta joined the attorneys general of 37 states — Arizona, Arkansas, Colorado, Connecticut, Delaware, District of Columbia, Florida, Georgia, Hawaii, Iowa, Illinois, Indiana, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Missouri, Nebraska, Nevada, New Jersey, New Mexico, New York, North Carolina, Ohio, Oregon, Pennsylvania, Rhode Island, South Carolina, Tennessee, Vermont, Virginia, Washington, West Virginia, and Wisconsin — in the settlement.
Read the settlement at https://tinyurl.com/navient-settlement.
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Share your Navient student loan experience with Times editor Jondi Gumz at 831-688-7549 x17.