One of the country's largest student loan servicers will pay more than $1 billion as part of a lawsuit settlement concerning allegations of widespread abusive and predatory lending practices.
Navient will provide a total of $1.85 billion worth of student loan debt relief to hundreds of thousands of borrowers nationwide, according to Pennsylvania Attorney General Josh Shapiro. The prominent loan servicer must also revise its practices to better advise borrowers on how to manage their student loan debt.
"Navient repeatedly and deliberately put profits ahead of its borrowers."
Keep reading to learn more about Navient's lawsuit settlement, as well as alternative debt repayment options to consider if you're struggling with student loans. You can view your estimated student loan refinancing terms on Credible to decide if this strategy is right for you.
Navient accused of targeting students with ‘deceptive and unfair schemes'
The attorney general accused Navient of two abusive lending practices: originating predatory subprime private loans to unwitting borrowers and steering borrowers toward more expensive repayment plans.
"The first scheme involved Navient issuing subprime private loans to borrowers they knew could not pay the money back – similar to the mortgage crisis in 2008," Shapiro said.
The federal loan servicer originated predatory loans to students attending for-profit colleges with low graduation rates, according to Shapiro, "even though it knew that a very high percentage of such borrowers would be unable to repay the loans."
"The second scheme we uncovered was Navient’s drive to mislead borrowers into forbearances, which stopped them from paying down the principal on their loan and led many to accumulate more debt and never-ending interest payments," Shapiro said.
The settlement includes conduct reforms that require Navient to explain the benefits of income-driven repayment plans before placing borrowers into voluntary forbearance. The loan servicer must also train specialists to advise borrowers on alternative repayment options and federal student loan forgiveness programs.
"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 said.
Who qualifies for student loan relief from Navient?
Nearly 66,000 borrowers with subprime private loans serviced by Navient will have their remaining loan balance discharged. Impacted borrowers will receive a notice of private debt cancellation by July 2022, and they don't need to take action to qualify for this group's $1.7 billion worth of relief.
Additionally, 350,000 federal loan borrowers who were placed on long-term forbearance will receive a restitution payment of about $260 each, amounting to a total payout of $95 million. These borrowers "will receive a postcard in the mail from the settlement administrator later this spring," according to the Pennsylvania Office of the Attorney General. If you think you qualify for a restitution payment, be sure to update your mailing address on the Department of Education's website.
If you don't qualify for this student loan relief, you could consider your alternative student loan repayment options like refinancing. Student loan refinance rates are still near record lows, according to Credible, which gives borrowers the opportunity to lock in better terms on their student debt repayment.
You can learn more about student loan refinancing by getting in touch with a knowledgeable loan officer at Credible.
How to decide if student loan refinancing is right for you
Student loan refinancing is when you take out a new loan to repay your existing debt on better terms, such as a lower interest rate. Some student loan borrowers may be able to reduce their monthly payments or pay off their debt faster by refinancing.
That being said, student loan refinancing isn't right for everyone. For example, refinancing your federal student loans into a private loan makes you ineligible for income-driven repayment plans (IDR), COVID-19 emergency forbearance and select student loan cancellation programs like Public Service Loan Forgiveness (PSLF).
But if you don't plan on taking advantage of these government benefits — or if you have private student loans that don't qualify for federal aid — then refinancing may help you save money while you repay your student loan debt. A recent Credible analysis found that well-qualified borrowers who refinanced to a shorter loan term were able to save nearly $17,000 in interest charges.
Browse current student loan refinancing rates in the table below, and visit Credible to see loan offers tailored to you without impacting your credit score.
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