Pennsylvania borrowers impacted by allegedly deceptive practices by student loan servicer Navient, will receive $3.5 million in restitution payments and $67 million in debt cancellation.
Pennsylvania Attorney General Josh Shapiro announced on Thursday that Navient has agreed to provide relief totaling $1.85 billion to borrowers across the country as part of a settlement with a coalition of 39 state attorneys general.
The settlement follows claims that the student loan company used forbearance steering practices and “predatory” subprime private loans to maximize profits.
“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,” said Shapiro. “Today’s settlement corrects Navient’s past behavior, provides much needed relief to Pennsylvania borrowers, and puts in place safeguards to ensure this company never preys on student loan borrowers again.”
Shapiro sued Navient in October 2017 and co-led the litigation and negotiation of the settlement with Washington, Illinois, Massachusetts and California.
The attorneys general claim that Navient steered borrowers into putting a forbearance on their loans, which added to the borrowers’ loan balances, pushing them further into debt. Navient could have instead offered services such as income-driven repayment plans or helped borrowers attain forgiveness of remaining balances of 20-25 years of qualifying payments.
Navient also allegedly originated subprime private loans to students attending for-profit schools and colleges with low graduation rates, even though it knew that a vey high percentage of those borrowers wouldn’t be able to pay back their loans.
Under the 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, 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.
Approximately 13,000 Pennsylvania borrowers will receive $3.5 million in restitution payments and another 2,467 Pennsylvanians will receive $67 million in debt cancellation.
“This is something myself, as well as many people in my position, felt like we would never get ahead of,” said Nicole S. of Easton. Nicole, a former student of the Art Institute of NYC, was a victim of the alleged practices.
“So many of my loans, which are private, individual loans, they don’t offer consolidation or income driven payments—they would rather put you right into forbearance, so it sits there growing interest,” she said. “I’ve been trying to get a mortgage for five years. My interest rate is higher. Anything you need credit for is affected.”