One of the nation's largest student loan servicing companies is paying $1.85 billion to settle a long-running lawsuit accusing it of predatory lending practices that cost young borrowers billions.
A group of states according to Pennsylvania Attorney General Josh Shapiro, who led the suit. Navient will pay $95 million in direct restitution to student borrowers and $142 million to the various attorneys general for them to spend on state initiatives., formerly part of Sallie Mae, in 2017 and accused the federal loan servicer of "deceptive and abusive" practices. Navient on Thursday agreed to settle the suit,
Under the deal, Navient will cancel $1.7 billion in debt for roughly 66,000 borrowers who defaulted on loans mostly originated between 2002 and 2010.
"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.
In the agreement, Navient denied breaking consumer protection laws or harming borrowers. The company also said it is working to enroll more borrowers in income-based loan repayment plans, noting that its default rates have declined.
"The company's decision to resolve these matters, which were based on unfounded claims, allows us to avoid the additional burden, expense, time and distraction to prevail in court," Navient Chief Legal Officer Mark Heleen said in a statement. "Navient is and has been continually focused on helping student loan borrowers understand and select the right payment options to fit their needs."
The suit accused Navient of steering students at for-profit schools into high-priced subprime loans despite knowing that most borrowers wouldn't be able to repay their debt. The AGs' investigation also concluded that Navient discouraged borrowers from enrolling in income-based debt repayment plans, instead putting them in loan forbearance plans that ultimately were more expensive.
By doing so, Navient "stopped [borrowers] from paying down the principal on their loan and led many to accumulate more debt and never-ending interest payments," Shapiro said.
"Navient's harmful conduct impacted everyone from students who enrolled in colleges and universities immediately after high school to mid-career students who dropped out after enrolling in a for-profit school in the early to mid-2000s," the statement said.
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