More than 1,100 Maryland residents will get more than $34 million in student loan debt relief to settle charges of abusive practices by student loan servicer Navient, the state Attorney General’s office said Thursday.
Navient, one of the nation’s largest student loan servicers, will provide $1.85 billion in restitution in Maryland, 38 other states and Washington, D.C. The settlement resolves allegations of unfair and deceptive loan servicing practices and abuses in originating predatory loans, Maryland Attorney General Brian E. Frosh announced.
Maryland’s restitution also includes a total of $3.2 million paid by check to 11,836 residents, the attorney general said.
The settlement, joined by a coalition of 39 attorneys general, resolves claims that since 2009 Navient has steered struggling student loan borrowers into costly long-term forbearances instead of counseling them about the benefits of more affordable income-driven repayment plans.
In the agreement, Navient denied violating consumer protection or other laws or causing borrower harm.
“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,” Mark Heleen, Navient’s chief legal officer, said in a statement. “Navient is and has been continually focused on helping student loan borrowers understand and select the right payment options to fit their needs.”
Three of Navient’s subsidiaries are parties to the settlement, including Navient Solutions, Pioneer Credit Recovery and General Revenue Corp. Terms of the settlement were included in a consent order and judgment filed Thursday in Baltimore Circuit Court.
“We alleged that Navient’s conduct was illegal and burdened struggling Marylanders with additional student debt,” Frosh said in a statement.
The lawsuit had alleged Navient violated the Consumer Protection Act by steering students into loan forbearance options that added to their debts and were not in their best interest. Navient also allegedly originated predatory subprime private loans to students attending for-profit schools and colleges with low graduation rates, even though it allegedly knew a high percentage of such borrowers would be unable to repay the loans.
Under the terms of the settlement, Navient will cancel the remaining balance on more than $1.7 billion in subprime private student loan balances owed by about 66,000 borrowers nationwide. In addition, a total of $95 million in restitution payments will be distributed to about 350,000 federal loan borrowers who were placed in certain types of long-term forbearances.
When making loans, Navient will be required to explain the benefits of income-driven repayment plans and offer to estimate income-driven payment amounts. The settlement also requires Navient to notify borrowers about the U.S. Department of Education’s recently announced Public Student Loan Forgiveness limited waiver opportunity, which temporarily offers additional loan forgiveness to millions of qualifying public service workers.
Consumers receiving private-loan debt relief will get a notice from Navient, while eligible federal borrowers will get a postcard in the mail later this spring.