Navient, one of the largest student loan servicers in the country, announced Thursday it has reached a $1.85 billion settlement with more than three dozen states in an effort to resolve allegations of predatory lending and deceptive practices over more than a decade.
The resolution includes $1.7 billion in private student loan debt cancellation — owed by about 66,000 borrowers nationwide and originated largely between 2002 and 2010 — and $95 million in restitution for borrowers, a bipartisan coalition of state attorneys general said.
Pennsylvania Attorney General Josh Shapiro, who spearheaded a lawsuit against Navient in 2017, said the loan management company steered borrowers further into debt through forbearance practices, which allowed borrowers to temporarily postpone repayment while still being charged interest. He also accused Navient of engaging in the use of risky subprime private loans for students to attend for-profit colleges, some with dubious track records, while knowing those borrowers would be unable to repay their debts.
"Navient repeatedly and deliberately put profits ahead of its borrowers — it engaged in deceptive and abusive practices, targeted students who it knew would struggle to pay loans back, and placed an unfair burden on people trying to improve their lives through education," Shapiro, who co-led the settlement, said in a statement.
Under the agreement, Navient is denying it violated consumer protection laws or caused borrowers harm.
"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," Mark Heleen, Navient's chief legal officer, said in a statement.
Navient, based in Wilmington, Delaware, was formed in 2014 when Sallie Mae, the largest servicer of the federal government's portfolio of direct student loans, split into two companies. Navient says it has served 12 million student loan borrowers with $300 billion worth of loans.
In September, the company announced it would no longer service federal student loans.
The latest action comes as student loan borrower advocates and some Democratic lawmakers continue to put pressure on the Biden administration to cancel student debt and grant greater financial relief amid the pandemic. More than 44 million Americans owe about $1.7 trillion in student loan debt.
Still, student loan borrower advocates praised the settlement with Navient as an important win.
"Borrowers may not be able to enjoy Navient CEO Jack Remondi’s $8 million salary, his three homes, or his use of the company's private jet. But they can rest a little bit easier knowing that a measure of justice has been served," said Mike Pierce, executive director of the Student Borrower Protection Center, a consumer advocacy group.
Aside from Pennsylvania, the other states that joined in the settlement were: Arizona, Arkansas, Colorado, California, Connecticut, Delaware, Florida, Georgia, Hawaii, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Missouri, Nebraska, Nevada, New Jersey, New Mexico, New York, North Carolina, Ohio, Oregon, Rhode Island, South Carolina, Tennessee, Vermont, Virginia, West Virginia, Washington and Wisconsin. Washington, D.C., is also included.
Under the agreement, which still requires court approval, borrowers who are subject to benefit do not have to take any personal action and should receive a notice from Navient directly. Those who are eligible for a restitution payment will be mailed more information this spring.