BOSTON (AP) – Navient, a major student loan servicing company, has settled allegations of deceptive lending practices for $1.85 billion, officials said Thursday in announcing a settlement that would cancel student loans of tens of thousands of borrowers.
The settlement includes $1.7 billion in debt cancellation and $95 million in restitution and involves 39 state attorneys general. It resolves claims that Navient led student borrowers into long-term forbearances instead of giving them advice on less costly repayment plans, according to Pennsylvania Attorney General Josh Shapiro, who co-led the litigation and negotiation of the settlement with the states of Washington, Illinois, Massachusetts, and California.
“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,” Shapiro said in a statement.
The settlement will require court approval.
Under the terms of the settlement, Navient will cancel more than $1.7 billion in subprime private student loans owed by over 66,000 borrowers nationwide, Shapiro said. Navient will also pay a total of $142.5 million, of which $95 million will be distributed to approximately 350,000 federal loan borrowers who were placed in certain types of long-term forbearances.