Navient settlement to forgive $133M in student loan debt to private borrowers in Illinois
Nationwide settlement with Sallie Mae loan servicer will forgive nearly $2 billion in debt across 39 states
SPRINGFIELD, Ill. (WGEM) - A nationwide settlement reach with Navient, formerly known as Sallie Mae, will require one of the largest student loan servicers in the U.S. to forgive nearly $2 billion in student loans.
The settlement was a part of a years-long, multi-state investigation into the company and their business practices. Illinois and Washington state were the first to begin investigating the servicer. The suit alleges Navient used deceptive and dishonest practices in order to sign borrowers up for loans set to “fail from the beginning.”
Attorney General Kwame Raoul said around 18,000 Illinoisans will be eligible for part of a nearly $5 million restitution payment from the loan servicer. Just over 5,000 will be entitled to loan forgiveness, totaling $133 million dollars.
“When borrowers experience issues with making repayments on their student loans, they should be able to turn to their servicer for accurate information, as well as trustworthy help and guidance,” Raoul said during a virtual press conference with several other attorneys general. “Navient failed to do so and instead steered borrowers into more debt.”
Navient advertised finding the best repayment plan for borrowers, while at the same time steering struggling debtors into long-term repayment plans without informing them of less costly options, according to a press release from the attorneys general.
The tactics used by Navient were two-fold, according to the suit. For some struggling borrowers, Navient would suggest long-term forbearance programs that would allow borrowers to pause payments on their loan, but it would also add interest to their outstanding balance. They also offered loans to for-profit school students and students in colleges with low graduation rates, despite the knowledge that those borrowers would likely never be able to pay back the loan.
Navient will make restitution payments to those who participated in costly forbearance programs between 2009 and 2017, totaling $95 million. Additionally, they will forgive $1.85 billion of the private student loan balances. they will also reimburse the attorneys general offices for the cost of investigating the company, totaling $142.5 million dollars.
Navient denies any wrongdoing.
“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,” Navient Chief Legal Officer Mark Heleen said.
Settlements will be sent out via mail by Navient by July. There is nothing eligible borrowers need to do at this time. The attorneys general suggested borrowers make sure their contact information is up-to-date with the federal student loan website. Anyone looking for more information on the suit can visit the Navient settlement website.
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