Student loan provider settles for $1.85 billion over allegations of predatory practices

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Jan. 13—Navient, a major student loan service provider in the U.S., has agreed to a $1.85 billion settlement over claims in participated in predate practices.

Ohio will receive $5.3 million in restitution payments, which will be shared among more than 19,800 federal loan borrowers impacted by Navient between 2009 and 2017, according to the Ohio Attorney General's Office. More than 3,500 borrowers in the state will receive a combined $81.8 million in canceled private loan debt.

"This settlement puts money back into the pockets of borrowers struggling to pay for college," Ohio Attorney General Dave Yost said. "It's also an important reminder for corporations that there are consequences for prioritizing profits over the public's best interest."

Under the settlement Navient is required to cancel the remaining balance on more than $1.7 billion in subprime private student loan balances owed by 66,000 borrowers across the country. The company also must pay $142.5 million to the 39 attorneys general on the case.

Borrowers impacted by the settlement do not need to take action at this time. Those receiving private loan cancellation will be notified by Navient by July 2022, along with refunds or any payments made after June 30, 2021, on the canceled private loans. Federal loan borrowers eligible for the estimated restitution payment of $260 will receive a postcard in the mail from the settlement administrator later this spring, according to the attorney general's office.

Navient was accused of participating in unfair and deceptive student loan services by pushing borrowers into expensive long-term payment plans. Interest accrued on the student loan balances stemmed from the company's practices and pushed borrowers further into debt, according to the attorney general's office.

The company is also accused of offering predatory subprime private loans to students attending for-profit schools and colleges with low graduation rates despite Navient knowing a high percentage of borrowers wouldn't be able to repay the loans.

The settlement includes conduct reforms that require Navient to explain the benefits of income-driven repayment places and to offer estimated income-driven payments amounts before putting borrowers into forbearance, according to the attorney general's office. The company also must train specialists to advise distressed borrowers about alternative payment options and share Public Service Loan Forgiveness and related programs to public service workers. Navient is required to notify borrower's bout the U.S. Department of Education's PSLF limited waiver opportunity.

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