Arkansas Attorney General Leslie Rutledge announced Thursday (Jan. 13) that Navient, one of the nation’s largest student loan servicers, has agreed to a $1.85 billion settlement to resolve allegations of widespread unfair and deceptive student loan servicing practices and abuses in originating predatory student loans.
As part of the settlement, 290 eligible Arkansas consumers will receive a total of $6,802,100 in student loan debt forgiveness.
Borrowers receiving private loan debt cancellation will receive a notice from Navient, along with refunds of any payments made after June 30, 2021, on the cancelled private loans. Federal loan borrowers who are eligible for a restitution payment of approximately $260 will receive a postcard in the mail from the settlement administrator later this spring.
This settlement, joined by a coalition of 39 attorneys general, resolves Navient claims on record since 2009, despite the company representing it would help borrowers find the best repayment options for them. Navient steered struggling student loan borrowers into costly long-term forbearances instead of counseling them about the benefits of more affordable income-driven repayment plans, the settlement said.
“Navient’s abusive practices have lured many Arkansans into debt they cannot afford,” said Rutledge.
Under terms of the settlement, Navient will cancel the remaining balance on nearly $1.7 billion in subprime private student loan balances owed by nearly 66,000 borrowers nationwide.
In addition, Navient will pay $142.5 million to the attorneys general. A total of $95 million in restitution payments of about $260 each will be distributed to approximately 350,000 federal loan borrowers who were placed in certain types of long-term forbearances.
The settlement includes conduct reforms that require Navient to explain the benefits of income-driven repayment plans and to offer to estimate income-driven payment amounts before placing borrowers into optional forbearances. Additionally, Navient must train specialists who will advise distressed borrowers concerning alternative repayment options.