Settlement Requires Company to Provide Debt Relief and Cease Unfair and Deceptive Practices
Vermont Business Magazine Attorney General TJ Donovan announced today that Navient, one of the nation’s largest student loan servicers, will provide $1,680,523 in debt relief to Vermont borrowers and reform its loan-servicing practices. The consent judgment, filed last week, is part of a $1.85 billion, multistate settlement joined by a coalition of 39 attorneys general resolving allegations of Navient’s unfair and deceptive student loan servicing practices and abuses in originating predatory student loans. If approved by the court, 65 qualified Vermont borrowers will receive private loan debt cancellation from Navient.
“Vermont students subjected to predatory loans will get forgiveness through this settlement,” said Attorney General Donovan. “My office will continue to hold loan companies accountable for their actions.”
Despite promising to help borrowers find the best repayment option to minimize interest costs, it is alleged by the coalition that Navient deceptively steered distressed federal loan borrowers into costly long-term forbearances instead of informing them about the benefits of income-driven repayment plans. Interest that accrued during these forbearances was added to borrowers’ loan balances, pushing borrowers deeper into debt.
Navient also allegedly originated unfair subprime private student loans that it knew were likely doomed to fail. The company made these risky subprime loans as an inducement to get schools to use Navient as a preferred lender for highly profitable federal and “prime” private loans, without regard for the borrowers and their families, many of whom were unknowingly ensnared in debts they could never repay.
Under the terms of the settlement, 65 qualified Vermont borrowers will receive a total of $1,680,523 in private loan debt cancellation. This debt relief will primarily go to borrowers who took out private subprime student loans through Navient’s predecessor, Sallie Mae, between 2002 and 2014, and then had more than seven consecutive months of delinquent payments prior to June 30, 2021. Those receiving private loan cancellation will receive notice from Navient by July 2022, along with refunds of any payments made on the cancelled loans after June 30, 2021. Navient will also alert the credit reporting bureaus to remove the tradelines associated with the cancelled loans.
The settlement also 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 and counsel public service workers concerning Public Service Loan Forgiveness (PSLF), including the recently announced PSLF limited waiver opportunity, and related programs. Conduct reforms imposed by the settlement also include prohibitions on compensating customer service agents in a manner that incentivizes them to minimize time spent counseling borrowers.
Vermont borrowers with questions about this settlement can visit https://ago.vermont.gov/blog/2022/01/21/frequently-asked-questions-about-the-navient-settlement/ or contact the Consumer Assistance Program at 1-800-649-2424. Additional information on the settlement can be found at www.NavientAGSettlement.com.
Source: MONTPELIER – Vermont AG 1.21.2022