The massive debt wipeout concludes an almost five-year-long investigation into complaints against the servicer.
Navient will be required to pay $1.85 billion, which includes:
- $1.7 billion in student loan cancelation
- $95 million in restitution
- $47.4 million in fees paid to the states and the District of Columbia
Among the accusations brought against Navient was one that the student loan servicer made predatory subprime loans to students that they know would be unable o repay the loans. These private loans were made to students attending schools with low graduation rates. In addition was the accusation that the student loan servicer offered these private loans as an incentive for schools to make Navient, operating as Sallie Mae at that time, a preferred lender for highly profitable federal loans.
Navient was also accused of steering student loan borrowers into long-term forbearance instead of income-based payment plans. Forbearance was ultimately more costly for these borrowers as the forbearance was usually long-term and interest continued accruing on borrowers’ loans while the loans were in forbearance. Some federal student loan borrowers who were placed into long-term forbearance will receive a $260 restitution payment.
There was also evidence that Navient employees were incentivized for how quickly they processed calls. As part of the settlement, Navient was advised to refrain from incentivizing employees in a manner that encouraged them to minimize the time that they spend counseling student loan borrowers.
What affected student borrowers can expect
- By July of 2022: Navient will notify impacted private student loans borrowers about the cancelation of their loans
- By July of 2022: Any payments made to the above-mentioned loans after June 30, 2021 will be refunded by Navient
- Late spring of 2022: The settlement administrator, Rust Consulting, will send a postcard to borrowers who qualify for a $260 restitution payment
- By mid-summer of 2022: Restitution checks will be mailed
Actions that student borrowers need to take
Affected student loan borrowers are encouraged to update their contact information at studentaid.gov so that notices and checks can be sent.
Even if you don’t believe that you’re impacted by this, it’s always important that your studentaid.gov account reflects your updated contact information.