One of the largest student loan servicers in the country has reached a $1.85 billion deal with 39 states to settle claims it engaged in predatory loaning practices.
As part of the deal, Navient will cancel the private loans of around 66,000 borrowers at a cost of $1.7 trillion. In addition, the company will pay restitution of $95 million to another 350,000 borrowers. Those borrowers, who were placed in long-term forbearance by Navient, will get $260 each.
Navient was sued by 39 states, which claimed the company gave out loans to people attending private colleges with low graduation rates, knowing them would be unlikely to repay them if, and when, they graduated. In addition, the company steered those who were unable to pay into their forbearance program. Borrowers in the program did not have to make payments on their loans but continued to accrue interest, driving them deeper into debt.
"Navient knew that people relied on their loans to make a better life for themselves and for their children, and instead of helping them, they ran a multibillion-dollar scam," Pennsylvania Attorney General Josh Shapiro said during a press conference announcing the settlement.
"Navient repeatedly and deliberately put profits ahead of its borrowers — it engaged in deceptive and abusive practices, targeted students who it knew would struggle to pay loans back, and placed an unfair burden on people trying to improve their lives through education," he added.
Navient denied breaking the law and said it was in its best interest to settle the six legal cases it was facing.
"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.