By Seth Gellman
On Thursday, January 13, Navient, one of the largest student loan providers in the nation, announced that it reached a $1.85 billion settlement with 39 state attorney generals over allegations of predatory lending and leading student borrowers into expensive plans rather than flexible repayments. In the resolution, Navient agreed to pay $95 million for states to offer borrowers reimbursement. About 350,000 borrowers can each receive $260.
Some states alleged that these loans were made in coordination with for-profit colleges to ensure student reliance on the company for other loans as well.
To qualify for some of the federal government student loan programs, which is absolutely necessary for most colleges and universities, the schools must prove that at least some revenue comes from other sources. A popular source is private student loans, in which Navient and predecessor Sallie Mae played a crucial role. Navient was formed in 2014 when Sallie Mae, a major player in the student loan industry, split into two companies. Navient claims to have served $300 billion worth of student loans to roughly $12 million borrowers.
Pennsylvania Attorney General Josh Shapiro, who co-led the settlement, alleged that Navient increased debt through forbearance practices, allowing borrowers to postpone payments while continuing to accrue interest. Navient’s chief legal officer, Mark Heleen, said that the settlement was to avoid further burden to the company, and that they continue to deny the claims.
The agreement, which still requires court approval, states that borrowers will receive a notice directly from Navient. They will be mailed more information in the coming months.
