Good News! Navient Required to Provide Student Loan Debt Relief

On Thursday, January 13, 2022, Navient, a student loan servicing company, announced that it had agreed to a student loan cancellation and restitution settlement with dozens of states in relation to a 2017 lawsuit about its lending and servicing practices. Nearly forty states and their attorney generals accused Navient of allowing and prompting its employees to perform abusive, deceptive and unfair practices against student loan borrowers that targeted the poor and those struggling to make payments.

The accusations of wrongdoing extended across a period of more than ten years. Navient's many questionable practices included pushing student loan borrowers attending low-graduation-rate colleges to choose private subprime loans even though the students were among those most likely to have difficulty repaying their loans. They also pushed some borrowers to pick temporary, interest-accruing, long-term forbearance as a payment postponement option instead of other available non-interest options.

To find out how the Navient settlement agreement might impact your student loan situation, read on:

Who Is Navient?

In 1973, Congress allowed the formation of a public, for-profit company called the Student Loan Marketing Association, known as Sallie Mae, to service federal student loans established by the Higher Education Act of 1965 (HEA). In 2014, this Government-Sponsored Enterprise (GSE) experienced a division of services. Navient, with headquarters in Wilmington, Delaware, became one off-shoot and continued as a federal student loan servicer. Sallie Mae became the Sallie Mae Bank and currently provides consumer banking services.

Navient typically services more than 12 million accounts and a total debt of almost $300 billion via approximately 6,000 U.S. employees. For perspective, Navient usually manages approximately 25 percent of all student loans in the country. Yet, it's also one of several federal student loan servicing companies that chose to exit the industry in 2021 because of the ongoing SARS-CoV-2 pandemic. It recently transferred all of its federal student loan accounts to Aidvantage, a Maximus Education, LLC federal student loan servicing unit, while continuing to maintain the private loan accounts.

Who Qualifies for Relief?

Navient has agreed to pay out $1.85 billion, which includes $1.7 billion for cancellation of private student loan debt and $95 million to certain borrowers as restitution. It is important to note that the company has admitted to no wrongdoing and calls the claims in the lawsuit "unfounded." As part of the agreement, Navient is allowed to claim that it didn't cause any harm to borrowers or violate any consumer protection laws. Navient's Chief Legal Officer, Mark Heleen, made a public statement that the company agreed to the settlement to "avoid the additional burden, expense, time and distraction to prevail in court."

Yet, more than 66,000 borrowers who received subprime loans from Navient from approximately 2002 to 2010 can expect to receive financial relief in the form of total debt cancellation. Approximately 350,000 borrowers directed to choose forbearance can expect to receive approximately $260 per borrower from the restitution portion of the settlement.

Take These Steps Today

The court handling the lawsuit must agree to the settlement before Navient can proceed with any applicable debt cancellation and restitution. Borrowers who expect one of these outcomes don't need to take any action since Navient must contact them once the lawsuit is approved by the court. Currently, Navient expects to reach out to borrowers about debt cancellation by July 2022. The company plans to reach out to affected borrowers about restitution by the end of Q1 (Spring) 2022.

That said, if this settlement applies to you, then you should make certain that the United States Department of Education at has your correct contact information on file. On the website, once you use or create a Federal Student Aid account identification, you can update your mailing address, phone number and email address. Additionally, you can find out more information by contacting your current servicer (Navient or Aidvantage) during their office hours at the phone number listed on your federal or private student loan monthly statement or online account.

Things to Remember

If the Navient settlement doesn't currently impact your student loan situation and you need financial help, you're not alone. A lot of people have been adversely impacted by the pandemic. As a result, the Department of Education and Biden administration approved an extension of the pandemic-related student loan payment pause to May 1, 2022, on December 22, 2021. The extension also halted the accrual of interest on most student loans. For more information about this and other repayment or pause alternatives, you merely need to contact your student loan servicer for updated details and assistance.

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