Maine borrowers will benefit from student loan settlement

·3 min read

Jan. 14—The student loan servicer Navient will cancel nearly $5 million in debt for Maine borrowers as part of a nationwide settlement agreement.

Thirty-nine attorneys general joined the lawsuit that accused Navient of engaging in unfair and deceptive practices. They accused Navient of steering borrowers into forbearance, or a pause in payments, instead of federal student loan relief programs. While those borrowers could stop making payments on their loans, their debt increased because their interest continued to accrue. The complaint also said Navient made predatory private loans to students who would be unlikely to repay them.

Under the terms of the settlement, Navient will cancel the remaining balance on more than $1.6 billion private loans to about 62,000 borrowers nationwide, including $4.9 million in loans to borrowers in Maine. The company will also pay $95 million in restitution, or about $260 each to approximately 350,000 people who were placed in certain types of long-term forbearances. Maine will receive those payments for more than 1,150 borrowers.

Maine Attorney General Aaron Frey announced the settlement in a news release Friday.

"Borrowers who will receive restitution or debt cancellation span all generations: Navient's harmful conduct impacted everyone from students who enrolled in colleges and universities immediately after high school to mid-career students who dropped out after enrolling in a for-profit school in the early to mid-2000s," the release said.

Navient issued a statement Thursday saying it denies violating any law or harming its borrowers.

"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. "Navient is and has been continually focused on helping student loan borrowers understand and select the right payment options to fit their needs. In fact, we've driven up income-driven repayment plan enrollment and driven down default rates, and every year, hundreds of thousands of borrowers we support successfully pay off their student loans."

The settlement still needs to be approved by the court. It will also require Navient to make certain reforms, such as training specialists who will advise borrowers about alternative repayment options like Public Service Loan Forgiveness. The company will also be required to explain the benefits of income-driven repayment plans and to offer to estimate income-driven payment amounts before placing borrowers into optional forbearances.

Federal loan borrowers who qualify for relief under the settlement do not need to take any action except update or create their account to make sure the U.S. Department of education has their current address.

People who will see debt cancellation will receive a notice from Navient and refunds of any payment on cancelled private loans after June 30. Borrowers who are eligible for the restitution payment will receive a postcard in the mail from the settlement administrator later this spring.

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