I consolidated Parent PLUS Loans from Sallie Mae. Am I eligible for relief under the settlement with Navient?

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The Credible Money Coach shares information on the Navient student loan settlement and suggests alternative ways to manage student loan debt. (Credible)

Dear Credible Money Coach,

I took a Parent PLUS Loan yearly for my two sons. From Sallie Mae to Navient, I defaulted many times until I got a steady job and consolidated through Direct Consolidation Loans. Would I qualify for Navient loan forgiveness on my Direct Consolidation Loan? My balance ballooned up to $80,000. I started with $25,000. — Lucy

Hello Lucy, and thank you for your question. I’m sorry you’re struggling with student loan debt. I hope the loans helped your sons get degrees that allow them to achieve their professional and financial goals. 

Unfortunately, it’s unlikely you can get your debt forgiven through the terms of the Navient settlement (more about it in a moment). However, other alternatives may make your debt more manageable or qualify you for future forgiveness, which I’ll explain.

One option that I don’t recommend is refinancing your Direct Consolidation Loan into a private student loan, even though it might reduce your interest rate. But if you or your sons have private student loans, refinancing can cut their costs. Check out Credible and compare student loan refinance rates from multiple lenders.

About the Navient settlement

Earlier this year, Navient agreed to settle a lawsuit brought by attorneys general in many states. As a result, the company (which spun off from Sallie Mae in 2014) agreed to cancel debt for about 66,000 borrowers who took out private student loans from Sallie Mae from 2002 to 2010 and defaulted. To be eligible for relief under the settlement, borrowers must:

  • Live in a restitution-participating state: Arizona, Arkansas, California, Colorado, Connecticut, Delaware, District of Columbia, Florida, Georgia, Hawaii, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Nebraska, Nevada, New Jersey, New Mexico, New York, North Carolina, Ohio, Oregon, Pennsylvania, Rhode Island, South Carolina, Tennessee, Virginia, Vermont, Washington, West Virginia, or Wisconsin.
  • Have an eligible private student loan.
  • Be delinquent for at least seven consecutive months before June 30, 2021.

The settlement provides restitution for some federal student loan borrowers with federal Direct or FFEL loans that went into forbearance, despite being eligible for income-based repayment. However, Direct Consolidation Loans don’t qualify.

According to the Navient Multi-State Settlement website, it seems unlikely that you’d qualify for relief. But if you live in a participating state listed above, contact your state attorney general’s office for more information.

Alternatives to consider

Lucy, while getting a federal Direct Consolidation Loan may not have reduced your interest rate, it simplified your payments while preserving access to some significant federal student loan benefits. Since an $80,000 debt is a lot to bear, it’s worth exploring the following options to make it more manageable.

Income-driven repayment plans

Your Direct Consolidation Loan qualifies for an income-driven repayment (IDR) plan. They set your monthly payment based on your income and household size. 

While IDR plans don’t help you pay off student loans sooner, they make them more affordable. Remember that interest accrues while you’re on an IDR plan, so your total debt increases over time. You can learn more about IDR plans at StudentAid.gov.

Public Service Loan Forgiveness

Although you consolidated multiple Parent PLUS Loans to a new Direct Consolidation Loan, you’re still eligible for the federal Public Service Loan Forgiveness (PSLF) Program, provided you meet other qualifications. 

You (not your sons) must work full-time in a qualifying job for the military, a government organization (federal, state, local, or tribal level), a not-for-profit organization, or in teaching. And you must make 120 qualifying monthly payments, although they don’t need to be in consecutive months. You can learn more about the PSLF Program at StudentAid.gov.

Long-term loan forgiveness

While it’s not ideal, you can also make student loan payments until you automatically qualify for forgiveness. Most federal loans, including Direct Consolidation Loans, are forgiven after paying for 20 or 25 years and staying current. 

If you qualify for an IDR plan, the reduced payments should help you never miss a payment. Once the payment period expires, your remaining loan balance gets forgiven.

Student loan refinancing

Refinancing a federal studen loan into a private loan is an excellent option in some situations. It may allow you to cut your interest rate, reduce your total interest, and pay off the student loan sooner.

First, make sure you exhaust your federal student loan options. Carefully weigh the pros and cons of keeping your Direct Consolidation Loan versus refinancing into a private student loan.

If you decide that refinancing is right for your situation, compare student loan refinance rates with Credible.

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About the author: Laura Adams is a personal finance and small business expert, award-winning author, and host of Money Girl, a top-rated weekly audio podcast and blog. She’s frequently quoted in the national media, and millions of readers and listeners benefit from her practical financial advice. Laura’s mission is to empower consumers to live richer lives through her speaking, spokesperson, and advocacy work. She received an MBA from the University of Florida and lives in Vero Beach, Florida. Follow her on LauraDAdams.com, Instagram, Facebook, Twitter, and LinkedIn.