A major settlement was announced on Thursday to resolve a long-standing lawsuit joined by 39 state attorneys general against Navient, one of the nation’s largest student loan companies. The lawsuit claimed that Navient engaged in unfair and deceptive practices by steering student loan borrowers into forbearances and away from critical federal student loan relief programs, like income-driven repayment plans and Public Service Loan Forgiveness (PSLF). Forbearances can be harmful for borrowers because interest accrues on their student loans during the period of paused payments; that accrued interest can then be capitalized — added back on to the loan principal balance — having a compounding effect and leading to runaway balance growth. Forbearances also do not count towards loan forgiveness terms, such as the 25-year repayment term for Income Based Repayment (IBR) or the 10 years of public service employment required for borrowers on track for the PSLF program. The federal Consumer Financial Protection Bureau (CFPB), in a separate lawsuit against Navient brought in 2017, also alleged that Navient engaged in forbearance-steering practices, resulting in financial harm to borrowers. According to the state attorney general lawsuit, Navient allegedly originated subprime private student loans for borrowers attending several predatory for-profit schools, as well. The lawsuit suggested that Navient issued these high-interest private student loans to students where it knew, or should have known, that those loans would be difficult for them to repay in light of the schools’ low graduation rates and dim career prospects. The terms of the settlement will include the following:As part of the settlement, Navient did not admit to any misconduct, and, according to the terms, nothing in the settlement provisions “may be taken as or construed to be an admission or concession of any violation of law, rule, regulation, other matter of fact or law, or of any liability or wrongdoing. No part of [the settlement agreement]… shall constitute evidence of any liability, fault, or wrongdoing” by Navient.” Navient has strongly denied that it engaged in misconduct or harmed student loan borrowers.“Navient repeatedly and deliberately put profits ahead of its borrowers – it engaged in deceptive and abusive practices, targeted students who it knew would struggle to pay loans back, and placed an unfair burden on people trying to improve their lives through education,” said Pennsylvania Attorney General Shapiro, who led the lawsuit, in a statement. “Today’s settlement corrects Navient’s past behavior, provides much needed relief to Pennsylvania borrowers, and puts in place safeguards to ensure this company never preys on student loan borrowers again.”Student loan borrower advocacy groups praised the settlement.
All data is taken from the source: http://forbes.com
Article Link: https://www.forbes.com/sites/adamminsky/2022/01/13/navient-settlement-to-result-in-17-billion-in-student-loan-cancellation/
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