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More than 400,000 student loan borrowers are in line for loan forgiveness or restitution payments from one of the nation’s largest student loan companies.
Navient reached a $1.85 billion settlement deal over allegations that the company engaged in unfair and deceptive loan practices. The settlement, announced in January, will cancel the debt of some delinquent private student loans and offer restitution to some federal student loan borrowers. People 50 and older account for about 22 percent of all student loan borrowing, according to AARP research.
The 39 state attorneys general involved in the settlement said Navient, formerly known as Sallie Mae, steered struggling student loan borrowers into costly long-term forbearance plans instead of counseling them about the benefits of more affordable income-driven repayment plans. The interest that accrued because of Navient’s practices was added to the borrowers’ loan balances, pushing borrowers further into debt.
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Income-driven repayment plans could have reduced some borrowers’ monthly payment to zero, provided interest subsidies and helped borrowers get loan forgiveness after 20 to 25 years of qualifying payments. (The forgiveness period is 10 years for borrowers qualified under the Public Service Loan Forgiveness Program.)
According to the attorneys general, Navient also made high-interest, predatory loans to students attending for-profit schools with low graduation rates, such as Corinthian schools, DeVry University, the Art Institutes and ITT Technical Institutes.
As a result of the settlement, Navient will cancel the remaining balance on some $1.7 billion in subprime private student loan balances owed by more than 66,000 borrowers nationwide who took out loans between 2002 and 2014. Those borrowers must also have had seven consecutive months of delinquent payments before June 30, 2021. Those who get their private loan balances canceled will get a notice from Navient by July 2022.
In addition, a total of $95 million in restitution payments of about $260 apiece will be distributed to about 350,000 federal loan borrowers whom Navient steered to forbearance instead of income-driven repayment plans. Eligible borrowers will get a postcard in the mail from the settlement administrator later in the spring. No action needs to be taken by borrowers at this time, according to the settlement.
The checks will go to borrowers in Arizona, California, Colorado, Connecticut, the District of Columbia, Delaware, Florida, Georgia, Hawaii, Iowa, Illinois, Indiana, Kentucky, Louisiana, Massachusetts, Maryland, Maine, Minnesota, Missouri, Mississippi, North Carolina, Nebraska, New Jersey, New Mexico, Nevada, New York, Ohio, Oregon, Pennsylvania, Tennessee, Virginia, West Virginia, Washington and Wisconsin.