The agreements include canceling some student loan balances and a payment to reimburse states for their costs.
01/17/2022 2:45 P.M.
3 minute read
Navient announced last week that it has reached agreements with state attorneys general to resolve their previously disclosed multistate litigation and investigations, according to a news release from the company.
“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 Navient’s Chief Legal Officer Mark Heleen in the news release. “Navient is and has been continually focused on helping student loan borrowers understand and select the right payment options to fit their needs. In fact, we’ve driven up income-driven repayment plan enrollment and driven down default rates, and every year, hundreds of thousands of borrowers we support successfully pay off their student loans.”
The agreements stem from a lawsuit filed by 39 state attorneys general and attempt to resolve claims that the company steered “federal loan borrowers into costly long-term forbearances instead of counseling them about the benefits of more affordable income-driven repayment plans,” according to a news release from the Massachusetts attorney general’s office, which is among those that filed suit against Navient.
California’s attorney general was also among those filing the lawsuit, and said Navient allegedly violated California’s Unfair Competition Law and False Advertising Law, according to a news release.
Navient Remediation Plans
“Navient will cancel loan balances of approximately 66,000 borrowers with certain qualifying private education loans that were originated largely between 2002 and 2010 and later defaulted and charged off,” according to its news release.
“Navient will notify the affected borrowers and co-borrowers shortly after the agreements receive final court approvals. In addition, the company will make a one-time payment of approximately $145 million to the states. A portion of that payment will reimburse the states for their costs with the remaining funds to be used by the states to provide payments to certain student loan borrowers as determined by the states. Navient estimates that these costs are substantially lower than the expected costs of ongoing state-by-state litigation and investigations.”
Student Loan Payments Update
In October 2020, Navient’s proposal to transfer the loan servicing of 5.6 million U.S. Department of Education (DOE) owned student loan accounts to Maximus has received all necessary approvals, ACA International previously reported.
Effective Oct. 20, Maximus replaced Navient, an ACA member company, as contractor to the DOE. Six student loan servicers working on federal student loans with the DOE have agreed to new contract terms that will be in place until December 2023, ACA previously reported.
The DOE and the Biden administration extended student loan forbearance until May 1, 2022.
DOE officials and the Biden administration previously said they were evaluating the effect of the omicron variant but were still planning to resume student loan payment and collections on Feb. 1.
Senate Majority Leader Chuck Schumer, D-N.Y., has been leading the charge for President Joe Biden to extend the pause on student loan payments since the omicron variant emerged, Forbes reports.
“With omicron spreading, the uncertainty with what happens next demands at least one more extension of the student loan payment pause,” Schumer said at a press conference, according to the article.
Another group of senators is requesting for the Biden administration to wave interest when student loan payments do resume, according to a letter from the office of U.S. Sen. Raphael Warnock, D-Ga.
Members of the House Education Committee have also requested an examination of the department’s decision to terminate its federal student loan contracts with private collection agencies, ACA previously reported.
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