HARTFORD, Conn. — Connecticut's attorney general says the large student loan servicer Navient has settled allegations of predatory practices for $1.85 billion.
Attorney General William Tong said Thursday in a press conference that the settlement includes $1.7 billion in debt cancellation and $95 million in restitution.
Tong said the settlement involves 39 state attorneys general. He said it resolves claims that Navient led student borrowers into long-term forbearances instead of giving them advice on less costly repayment plans.
The New York Times reported that Navient says it did not act illegally and it did not admit fault in the settlement.
Tong said in Connecticut, 1,339 borrowers will receive $19 million in direct private loan debt relief. Additionally, 4,875 borrowers will receive nearly $1.3 million in restitution. The State will receive $141,240 in restitution to be deposited into the general fund.
According to https://navientagsettlement.com/ Federal loan borrowers who qualify for relief under this settlement do not need to take any action except update or create their studentaid.gov account to ensure that the U.S. Department of Education has their current address.
“Navient steered borrowers to costly payment plans, and away from reasonable and affordable options and programs," Tong said. "Their predatory loans left thousands of Connecticut families saddled with unaffordable debt. This settlement will send millions of dollars directly to thousands of Connecticut borrowers who were deceived by Navient’s abusive practices."
According to the attorney general, the interest that accrued because of Navient’s forbearance steering practices was added to the borrowers’ loan balances, pushing borrowers further into debt.
If the company had provided borrowers with the help it promised, "income-driven repayment plans could have potentially reduced payments to as low as $0 per month, provided interest subsidies, and/or helped attain forgiveness of any remaining balance after 20-25 years of qualifying payments (or 10 years for borrowers qualified under the Public Service Loan Forgiveness Program)."
According to Tong, Navient also allegedly originated predatory subprime private loans to students attending for-profit schools and colleges with low graduation rates, even though it knew that a very high percentage of such borrowers would be unable to repay the loans.
Navient allegedly made these risky subprime loans as “an inducement to get schools to use Navient as a preferred lender” for highly profitable federal and “prime” private loans, without regard for borrowers and their families, many of whom were unknowingly ensnared in debts they could never repay.
Information from the Associated Press is included in this story.
Doug Stewart is a digital content producer at FOX61 News. He can be reached at dstewart@fox61.com.
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