By Matthew Kaufman
Staff Writer
Student loan provider Navient agreed in a settlement to wipe out $1.7 billion of debt and provide $95 million in restitution, following allegations from 39 states that it issued predatory and unfair loans to people who could not afford them. The agreement came on Jan. 13. Affected borrowers, totaling over 66,000, will have their loans cleared as a result of the settlement. 350,000 federal borrowers will also receive checks of $260 in restitution, according to the AP.
According to the Washington Post, the settlement has been praised by both the attorneys general who filed the lawsuit and by Navient itself, which denies any wrongdoing and is eager to put the litigation behind it.
“This settlement not only holds [Navient] accountable but brings real relief to hundreds of thousands of Americans who are struggling to pay their student loans,” Pennsylvania Attorney General Josh Shapiro told the Post. “We’re going to hold the powerful institutions in this country accountable when they take advantage of people.”
The states allege that Navient, which services 25% of student loans in the U.S., worked with for-profit schools to issue loans to students who could not afford them. These students then ended up with degrees from schools with poor reputations and tens of thousands of dollars in debt, according to the New York Times.
In a statement, Navient, which was called Sallie Mae at the time of the alleged mal-practices, said it cooperated with the settlement so that the company would not have to draw out the litigation any further.
“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,” said Mark Heleen, Navient’s chief legal officer. “Navient is and has been continually focused on helping student loan borrowers understand and select the right payment options to fit their needs.
As reported by the Times, the settlement is controversial, because only those who failed to make payments on their loans will benefit from the payout. Those who made their payments on time, no matter the financial burden caused by the loans, will have to continue making payments to Navient.
Victoria Linssen told the Times that she pays $500 each month towards repayment of her Navient loan, sometimes having to ignore essential expenses like groceries and rent because of the loan. She has never missed a payment, so she has to continue paying.
“It’s incredibly unfair,” said Linssen. “If you were defrauded by your school, you were defrauded, and your loans should be released whether you’ve paid on them or not.”
Rob Bonta, the attorney general of California defended the decision to exclude those who were caught up on payments by noting that the settlement targets those who were most badly affected by Navient’s practices.
Eileen Connor, director of the Project on Predatory Student Lending, told the Times that this type of settlement is common in high profile cases brought by states.
“It’s ‘Let’s make this big splashy announcement’ that creates the impression in the public’s mind — and, sadly, in the minds of people who have these loans — that relief is here,” said Connor, “but when you get into the details, it’s not actually helping many people.”
According to the AP, qualified borrowers will be notified of their debt cancellation by July, and those who qualify for restitution will receive checks by mid-2022.
