Louisiana News

Louisiana borrowers to receive $27M in settlement with Navient

(The Center Square) – Louisiana student loan borrowers will receive more than $27 million in relief as part of a national settlement with Navient, one of the nation’s largest student loan servicers.

Louisiana Attorney General Jeff Landry announced Navient will provide a total of $3.6 million in restitution payments for more than 13,000 federal loan borrowers in the state, as well as more than $23.7 million in private loan cancellation for 1,178 Louisiana borrowers as part of the settlement.

Navient will cancel the remaining balance on nearly $1.7 billion in subprime private student loan balances owed by nearly 66,000 borrowers nationwide. The company also will pay $95 million in restitution for about 350,000 federal loan borrowers through payments of $260 each.

“Through unfair and deceptive practices, Navient drowned many of our neighbors in debt,” Landry said. “I am proud to not only bring relief to Louisiana borrowers, but also establish protections to prevent Navient from preying on students in the future.”

The lawsuit involved a coalition of 39 attorneys general that sued to resolve claims Navient steered students struggling to pay loans into long-term forbearances instead of explaining the benefits of more affordable income-driven repayment plans.

Navient added interest that accrued in forbearance to borrowers’ loan balances, increasing their debt, instead of helping them connect with income-driven repayment plans that potentially could have reduced payments to nothing. The income-driven repayment plans also could have provided interest subsidies, and potentially helped attain forgiveness on balances remaining after 10 to 25 years for those making qualifying payments.

The attorneys general also alleged Navient originated private predatory subprime loans to students at for-profit colleges with low graduation rates, despite the high probability students would be unable to repay the loans, Landry said.

Landry filed the settlement as a proposed Consent Judgment and Complaint last week in the 19th Judicial District Court, which must approve the settlement.

In addition to the financial relief and restitution, the settlement requires Navient to better explain the benefits of income-driven repayment plans and offer estimates of payment amounts before placing borrowers into forbearances. The company also must train specialists to advise borrowers on alternative repayment options, including the Public Service Loan Forgiveness program for public service workers.

Under the settlement, Navient must notify borrowers about the U.S. Department of Education’s new PSLF limited waiver opportunity, which temporarily offers millions of qualifying public service workers the ability to apply previously nonqualifying repayment periods toward loan forgiveness.

That opportunity requires borrowers to consolidate into the Direct Loan Program and file employment certifications by October.

Private loan borrowers will receive a notice from Navient by July, along with refunds of any payments made after June 30, 2021. Federal loan borrowers who are eligible for the $260 restitution payment will receive a postcard in the mail from the settlement administrator this spring, Landry said.

“Until recently, Navient had a contract to service federal student loans owned by the U.S. Department of Education, including a large portfolio of loans made under the Direct Loan Program and a smaller portfolio of loans made under the Federal Family Education Loan (FFEL) program. On October 20, 2021, the U.S. Department of Education announced the transfer of this contract from Navient to Aidvantage, a division of Maximus Federal Services, Inc,” according to a Landry news release. “However, Navient will continue to service federal student loans made under the FFEL Program that are owned by private lenders, as well as non-federal private student loans.”

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