Missouri Attorney General issued the following announcement on Jan. 13.
Missouri Attorney General Eric Schmitt announced that Navient, one of the nation’s largest student loan servicers, entered into a civil settlement agreement with his office and 38 other states for abuses originating in predatory student loans. The agreement resulted in a $53 million settlement for Missourians: $2.5 million in restitution and $51 million in private loan debt cancellation.
“In this case, my Office obtained over $53 million in debt relief and restitution to resolve allegations of widespread unfair and deceptive student loan servicing,” said Attorney General Schmitt. “Taking advantage of students who need assistance in funding their educations is illegal, and can hurt the futures of so many. This settlement is a great result for Missouri students, and for the entire state.”
This settlement resolves claims that since 2009, after representing that it would help borrowers find the best repayment options for them, Navient steered struggling student loan borrowers into costly long-term forbearances instead of counseling them about the benefits of more affordable income-driven repayment plans. According to the Attorney General, the interest that accrued because of Navient’s steering practices was added to the borrowers’ loan balances, pushing borrowers further in debt.
Navient also allegedly originated predatory subprime private loans to students attending for-profit schools and colleges with low graduation rates, even though it knew that a very high percentage of such borrowers would be unable to repay the loans.
Moving forward, Navient will be required to explain the benefits of income-driven repayment plans, as well as offer to estimate income-driven payment amounts before placing borrowers into optional forbearances. Navient must also train specialists who will advise distressed borrowers concerning alternative repayment options. Additionally, the settlement requires Navient to notify borrowers about the U.S. Department of Education’s new PSLF opportunity, which temporarily offers millions of qualifying public service workers the chance to have previously non-qualifying repayment periods counted toward loan forgiveness.
As a result of today’s settlement, borrowers receiving private loan debt cancellation will receive a notice from Navient, along with refunds of any payments made on the cancelled private loans after June 30, 2021. Federal loan borrowers who are eligible for a restitution payment of approximately $260 will receive a postcard in the mail from the settlement administrator later this spring.
States joining Missouri in the lawsuit include Arizona, Arkansas, California, Colorado, Connecticut, the District of Columbia, Delaware, Florida, Georgia, Hawaii, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Nebraska, Nevada, New Jersey, New Mexico, New York, North Carolina, Ohio, Oregon, Pennsylvania, Rhode Island, South Carolina, Tennessee, Virginia, Vermont, Washington, West Virginia, and Wisconsin.
Original source can be found here.