The Navient lawsuit filed against the company has finally been settled. This settlement will erase nearly $1.7 billion in private student loans, pay $350,000 in restitution to 350,000 borrowers, and reform its practices to clearly explain income-driven repayment plans. The lawsuit was filed in January 2017.
Navient settles lawsuit accusing it of predatory lending practices
In a settlement announced Friday, Navient agreed to pay $95 million to 350,000 consumers in restitution for illegal student loans. Of those borrowers, 20,000 reside in Ohio. All of them will receive a check for $260, but those who received private loans will also be eligible for reimbursement for payments made after June 30, 2021. Those borrowers will be notified by mail.
Several lawsuits allege that Navient’s practices were predatory, a fact that the company has denied. In 2010, a Navient employee wrote an email that said that private loans were merely baited to attract government loans. However, after scandals erupted and the company’s reputation deteriorated, Navient stopped offering private loans. This move avoided a lengthy court battle, but it didn’t eliminate all allegations.
While a court judge did not find Navient guilty of any wrongdoing, the settlement does not end the company’s behavior. In addition to the money that Navient will pay to borrowers, the settlement will wipe out $1.7 billion in private student loans. The settlement also excludes certain borrowers who paid on time and made the payments on time. If this settlement holds, it will be beneficial for hundreds of thousands of borrowers.
Will erase $1.7 billion in private student loans
In a settlement that will erase up to $1.7 billion in private student loans, Navient will wipe out the remaining balances on more than 66,000 borrowers’ subprime loans. The company will also pay restitution to approximately 350,000 federal loan borrowers. The settlement will help borrowers of all ages, from the youngest to the oldest, who attended for-profit schools and earned worthless degrees.
The settlement was coordinated by 39 state attorneys general. The company has agreed to erase nearly $1.7 billion in debt and pay $95 million in restitution to select federal student loan borrowers. According to the suit, Navient disbursed loans to students who could not afford them. However, Navient has denied that it violated the law. However, the company will reimburse private student loan borrowers for any payments they have made after June 30, 2021.
The settlement will wipe out $1.7 billion in private student loans owed to Navient by requiring the company to stop charging for its services. As part of the settlement, Navient will notify borrowers of the canceled loans by July. Those who made payments after June 30 will be notified by mail if they are eligible for restitution. The settlement comes as the Democratic administration attempts to tackle the student loan crisis while stepping up scrutiny on private student loan providers.
Will pay $95 million in restitution to 350,000 borrowers
The company will pay restitution to a total of 350,000 borrowers for shady practices that led to the default of millions of federal student loans. The settlement, which will eliminate tens of millions of dollars in debt, involves a multibillion-dollar settlement. The money will be distributed to the 350,000 borrowers who are eligible to receive a check. The checks will be for $260 each.
The settlement ends a nearly five-year investigation into the company’s practices. The settlement is a result of Navient’s alleged practices of originating predatory private student loans for students attending for-profit colleges. While Navient executives knew that many borrowers would not be able to pay the money back, they encouraged them to do so anyway. This practice is similar to the subprime mortgage crisis, which led to countless foreclosures and the economic collapse in 2008.
Will reform its practices to explain income-driven repayment plans
This lawsuit claims that Navient unfairly steered students into forbearance, which was a temporary suspension of loan payments. While forbearance seemed like a good option at the time, it had little or no effect on the borrower’s financial situation. The company accumulated substantial interest on the student loans during forbearance. As a result, the CFPB’s allegations are unfounded.
The new practices are intended to minimize the confusion surrounding income-driven repayment plans. In addition to simplifying the application process and providing clearer information about these plans, the reforms will also make the program easier to understand for borrowers. In addition to streamlining the program, Navient also intends to keep the option of a fixed payment, which has many benefits. Those who opt for the fixed-payment option can take advantage of the lower monthly payments while maintaining their credit score.
Ultimately, the new plans may prove to be an important solution to the problem of rising default rates. Whether income-driven repayment plans are right for borrowers will depend on the policy they choose. The plan could help borrowers avoid the trap of default by making them aware of their repayment options. But borrowers must enroll in such a plan and recertify their eligibility annually. The program comes with several administrative challenges that must be addressed.