Content specialist with interest across sectors like Finance, Politics, Environment, Technology & Education. Loves Fiction! A reader, dreamer & blogger. When not writing, you will find her enjoying solitude like her cats
Navient will be paying a total of $1.85 billion as part of its deal with the states to resolve the accusations against it.
Navient, one of the most popular and leading student loan service providers, has agreed to a settlement with 39 US states to forgive up to $1.7 billion debt under private student loans. In addition, it will also pay the states $142.5 million which will comprise the $95 million payment to the affected borrower. The US student loan giant will thus be paying a total of $1.85 billion as part of its deal with the states to resolve the accusations against it of routing borrowers towards costly repayment plans.
However, Navient has refuted all the allegations and denied violating any law calling the accusations baseless. The Chief Legal Officer at Navient, Mark Heleen gave a statement asserting that the deal is a means to avoid any more litigation and thus save time, cost and focus of the company.
Accusations against Navient of Engaging in Dishonest Loan and Debt Practices
The company has been charged with several lawsuits since 2009 and the settlement is a step in the right direction as it would absolve the company of all the six unsettled state lawsuits. The federal government doesn’t guarantee the private loans which Navient has lent out to several student borrowers. Therefore, Navient’s investors will be taking care of the incurred losses and not the federal government.
According to the states, Navient purposely made the borrowers accept expensive long-term repayment plans. Therefore, there was no information or education imparted on the benefits of income-driven repayment plans to these borrowers. This led to the accrual of interest over time eventually pushing the borrowers into great debts. Navient was also indicted for offering predatory subprime private loans in order to be treated as a preferred lender by for-profit schools.
The Attorney General of Pennsylvania Josh Shapiro accused Navient of blocking the dreams of several borrowers with respect to other life-changing things like buying a house, being an entrepreneur or raising a family. He blamed the company to have taken advantage of people’s reliance on it for a better future and running a multibillion-dollar scam out of it.
Navient shares were trading at $21.98 on Thursday as they rose by 0.08%.
Burgeoning Student Loan Crisis
In order to lessen the burden of the student loan crisis, the Biden administration has been trying to restructure the loan processing system. November 2021 saw the government cutting off all ties with private loan collection firms and also cancelling up to $11.5 billion in debt for up to 600,000 borrowers through several moves. Apart from cancellations, the Biden government also suspended the payment of student loans during the pandemic and has announced the extension till May 1. The government is trying to put a leash on the country’s student loan crisis and increase the scrutiny of private loan providers.
Navient is one of the leading student-loan service providers in the USA and is based out of Wilmington, Delaware. It came into existence after the parent company Sallie Mae split in 2014 into two units; Sallie Mae Bank and Navient. The company has 6,000 employees spread across the country and as per the 2018 report; it facilitated 25% of student loans in the country.