Navient settlement: student borrowers in debt will benefit

In this image provided by Ashley Hardin, Ashley Hardin, 38, of Seattle, and her mother, Lajay Gove, pose inside Layers Sandwich Co., a food truck Hardin runs with her husband, Avery Hardin, on May 29. 2021, in Seattle.  Ashley Hardin will have approximately $108,000 in private student <a class=loan debt forgiven as part of a nationwide settlement announced Thursday, January 13, 2022, involving student loan manager Navient. The settlement, which has yet to be approved by the court, includes $1.7 billion in debt forgiveness and $95 million in restitution, and it settles allegations of predatory lending practices by Navient. (Avery Hardin via AP)” title=”In this image provided by Ashley Hardin, Ashley Hardin, 38, of Seattle, and her mother, Lajay Gove, pose inside Layers Sandwich Co., a food truck Hardin runs with her husband, Avery Hardin, on May 29. 2021, in Seattle. Ashley Hardin will have approximately $108,000 in private student loan debt forgiven as part of a nationwide settlement announced Thursday, January 13, 2022, involving student loan manager Navient. The settlement, which has yet to be approved by the court, includes $1.7 billion in debt forgiveness and $95 million in restitution, and it settles allegations of predatory lending practices by Navient. (Avery Hardin via AP)” loading=”lazy”/>

In this image provided by Ashley Hardin, Ashley Hardin, 38, of Seattle, and her mother, Lajay Gove, pose inside Layers Sandwich Co., a food truck Hardin runs with her husband, Avery Hardin, on May 29. 2021, in Seattle. Ashley Hardin will have approximately $108,000 in private student loan debt forgiven as part of a nationwide settlement announced Thursday, January 13, 2022, involving student loan manager Navient. The settlement, which has yet to be approved by the court, includes $1.7 billion in debt forgiveness and $95 million in restitution, and it settles allegations of predatory lending practices by Navient. (Avery Hardin via AP)

PA

Tens of thousands of people who have taken out student loans over the past 20 years could have their loans forgiven or receive a small check as part of a national settlement with Navient, a major student loan collection company, following allegations of abusive lending practices.

Proposed settlements were filed Thursday in courts across the country.

The deal, if approved by a judge, cancels $1.7 billion in private debt owed by more than 66,000 borrowers across the United States and distributes a total of $95 million in restitution payments. ‘about $260 each to about 350,000 federal borrowers.

The proposed settlements have been filed in the courts of each participating state and will require court approval.

Navient said he did not act illegally and admitted no wrongdoing in the settlement.

Here is an overview of the details and who is supposed to benefit:

WHO DOES IT AFFECT?

Borrowers who will receive debt restitution or cancellation span all generations, officials said. They include students who went to colleges or universities right after high school and mid-career students who dropped out after enrolling.

The loans were taken mainly between 2002 and 2014, officials said. Private loans often came with a variable rather than fixed interest rate and a shorter window than federal student loans to make payments before default.

Many borrowers who were struggling to make their payments were not told about a federal “income-tested” program that could lower their payments. Others have not been told about a federal program that forgives part of the debt of public sector workers.

HOW TO KNOW IF YOU BENEFIT?

Borrowers who will have their private loan debt forgiven will be notified by Navient by July 2022, along with a refund of payments they made on the loan after June 30, 2021, according to state officials. Private borrowers do not have to do anything to qualify.

Borrowers who are eligible for a restitution payment of about $260 will receive a postcard from the settlement administrator this spring, state officials say. Checks should be sent out in mid-2022.

Qualifying federal borrowers should update their studentaid.gov account, or create one, to ensure that the US Department of Education has their current address.

More details are here.

WHO IS ELIGIBLE FOR RESTITUTION?

State officials say there are various situations that make borrowers eligible.

For example, they must have lived in a state participating in the settlement in January 2017 and spent at least two years in forbearance.

Forbearance occurs when lenders allow borrowers to suspend or reduce payments for a limited time while they improve their finances. However, interest on the loan continues to accrue and may ultimately increase the amount paid over the life of the loan.

WHO IS ELIGIBLE FOR DEBT CANCELLATION?

Borrowers who will primarily have their debt forgiven took out subprime private student loans through Sallie Mae between 2002 and 2014 and then had more than seven consecutive months of delinquent payments, state officials say.

For example, in Massachusetts and Pennsylvania, the average debt forgiven is about $27,000, officials say. In Washington State, it’s about $25,000.

WHAT ARE SOME EXAMPLES?

From Philadelphia, Alexis Miller was the first in her family to go to college and needed financial assistance to attend. She chose the nursing program at Drexel University and in 2006 took out a loan from Navient. The total cost of the nursing school loans was around $60,000, and then interest and penalties — some of which she was not told — brought the total to $81,000 or $82,000, Miller said.

“To say this company plagued me is an understatement,” Miller said.

The company harassed her, her employers and family members with phone calls, gave her misleading information about relief programs and pressured her to abstain ‘that I knew this was not. wasn’t really the right choice,” she said.

“I tried my best to make ends meet, with my own financial issues and there was just no solution, they never really wanted to work with me,” Miller said.

Ultimately, it destroyed her credit, she said.

The lawsuit filed by Pennsylvania in 2017 included other examples.

A student who enrolled in a master’s program did not graduate and struggled to repay the loan, he said.

Despite demonstrating these financial difficulties to Navient, the company did not enroll the student in an “income-driven plan” to reduce payments until 2015, six years after they were first authorized under the law. federal in 2009. Nearly $27,000 in interest was added to his loans after 2004, according to the lawsuit.

In another example, a public sector employee qualified for a federal debt cancellation program, but Navient nevertheless gave her false information that deterred her from enrolling.

Seven years later — in 2014 — she learned she was indeed eligible, meaning she had made seven years of payments that didn’t count toward the total because she didn’t enroll in 2007, according to the trial.

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Follow Marc Levy on Twitter at https://twitter.com/timelywriter.

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