States attorneys general accused Navient of engaging 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."
The agreement, announced Thursday following over four years of litigation, does not include any admission of guilt on the part of Navient. The company "expressly denies violating any law, including consumer-protection laws, or causing borrower harm."
The deal includes an agreement to cancel student loans for approximately 66,000 borrowers across 36 states and Washington, D.C. with loans from between 2002 and 2010 that "later defaulted charged off."
The total sum of those cancellations will total over $1.7 billion, with most of the amount already charged off, the company claimed.
The company will also pay around $142.5 million in other penalties to a further 350,000 borrowers. It will also need to advise borrowers more clearly on their options and repayment plans.
"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.
But Massachusetts Attorney General Maura Healey hailed the settlement as "an important step towards addressing our broken student loan repayment system."
Navient will contact affected borrowers once it receives court approval on the deal.
The Associated Press contributed to this report.