Press Releases
01/13/2022
Attorney General Tong, Consumer Protection Commissioner Seagull and Banking Commissioner Perez Announce $1.85 Billion Settlement With Student Loan Servicer Navient
Thousands of Connecticut borrowers will receive loan relief and restitution
(Hartford, CT) – Attorney General William Tong, Consumer Protection Commissioner Michelle H. Seagull and Banking Commissioner Jorge Perez today announced a $1.85 billion settlement with the student loan manager Navient who will direct millions in debt relief and restitution to thousands of Connecticut borrowers.
The settlement, joined by a coalition of 39 attorneys general, resolves allegations of widespread unfair and deceptive student loan servicing practices and abuse in the granting of predatory student loans. States claimed that since 2009, despite promising to help borrowers find the best repayment options for them, Navient has steered struggling student borrowers into costly long-term forbearances and away from repayment plans. more affordable income-oriented.
In Connecticut, 1,339 borrowers will receive $19 million in direct private 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 in the general fund.
“Navient has steered borrowers toward expensive payment plans, and away from reasonable and affordable options and programs. Their predatory lending has left thousands of Connecticut families struggling with unaffordable debt. This settlement will send millions of dollars directly to thousands of Connecticut borrowers who have been deceived by Navient’s abusive practices,” said Attorney General Tong. “This is a massive win for borrowers, but there is still a lot of work to do to address the crushing financial burden of student debt. Connecticut families owe billions of dollars in student loans, an insurmountable obstacle for many looking to own their own home, start a family or expand a business. I pledge to continue to work alongside my fellow Attorneys General and state and federal government officials to address this financial crisis and ensure affordable access to education for all.
“Graduating from college should be an exciting step, but for many people it has become a devastating and costly burden,” said DCP Commissioner Michelle Seagull. “Thank you to Attorney General Tong for his persistence in this case, which will have a direct impact on holding student loan companies accountable for the promises they make to borrowers. We know this settlement will help many people who have entered into agreements expensive loan that they are still struggling to repay.
“I would like to thank Attorney General Tong for his leadership in this case. Given the ministry’s recent action against Navient, this underscores the Lamont administration’s commitment to protecting students and their families and how important it is to have dedicated partners in this mission. The Department maintains its unwavering commitment to hold these companies accountable when they violate our laws at the expense of Connecticut borrowers,” said bank commissioner Jorge Perez.
Attorney General Tong today filed the settlement as a motion for stipulated judgment and complaint in Hartford Superior Court. The settlement will require court approval.
According to the attorneys general, interest accrued as a result of Navient’s forbearance practices was added to borrowers’ loan balances, pushing borrowers further into debt. If the company had instead provided borrowers with the help it promised, income-driven repayment plans could have potentially reduced payments to as little as $0 per month, offered interest rate subsidies and/or help obtain cancellation of any remaining balance after 20-25 years of qualifying payments (or 10 years for qualified borrowers under the Civil Service Loan Forgiveness Scheme).
Navient also allegedly created predatory private loans at risk to students attending for-profit schools and colleges with low graduation rates, even though it knew a very high percentage of those borrowers would be unable to repay the loans. Navient reportedly made these risky subprime loans as “an incentive to get schools to use Navient as a preferred lender” for highly profitable “prime” federal and private loans, with no regard for borrowers and their families, many of whom were without the find themselves trapped in debts that they can never repay.
Under the terms of the settlement, Navient will cancel the remaining balance on $1.7 billion in subprime private student loan balances owed by more than 66,000 borrowers nationwide. Additionally, Navient will pay $142.5 million to the attorneys general. A total of $95 million in restitution payments of about $260 each will be distributed to about 350,000 federal borrowers who have been placed in some type of long-term forbearance. Borrowers who will receive debt restitution or forgiveness span all generations: Navient’s harmful conduct has affected everyone, from students who enrolled in colleges and universities immediately after high school to mid-career students who dropped out after enrolling in an early-to-middle for-profit school. -2000s.
The settlement includes conduct reforms that require Navient to explain the benefits of income-tested repayment plans and to offer to estimate income-tested payment amounts before placing borrowers in optional forbearances. In addition, Navient is to train specialists who will advise distressed borrowers on alternative repayment options and advise civil servants on Civil Service Loan Forgiveness (PSLF) and related programs. The conduct reforms imposed by the regulations include prohibitions on compensating customer service agents in a way that incentivizes them to minimize the time spent advising borrowers.
The settlement also requires Navient to notify borrowers of the U.S. Department of Education’s recent announcement Possibility of limited derogation PSLF, which temporarily offers millions of eligible public servants the opportunity to benefit from previously ineligible repayment periods counted for loan cancellation, provided that they join together in the direct loans program and file certificates of use before October 31, 2022.
As a result of today’s settlement, borrowers with Private Loan Debt Cancellation will receive notice from Navient by July 2022, along with reimbursement of any payments made on Private Loans canceled after 30 June 2021. Federal borrowers eligible for a restitution payment of approximately $260 will receive a postcard in the mail from the Settlement Administrator later this spring.
Federal borrowers who qualify for relief under this settlement do not need to take any action other than updating or creating their studentaid.gov account to ensure that the U.S. Department of Education at their current address. For more information, visit www.NavientAGSettlement.com.
Until recently, Navient had a federal student loan administration contract owned by the US Department of Education, including a large portfolio of loans issued under the Direct Lending Program and a smaller portfolio of loans issued under the under the Federal Family Education Loans (FFEL) program. On October 20, 2021, the U.S. Department of Education announced the transfer of this contract from Navient to Aidvantage, a division of Maximus Federal Services, Inc. However, Navient will continue to service federal student loans issued under the FFEL program that belong to private lenders, as well as non-federal private student loans.
Today’s settlement was led by Pennsylvania, Washington, Illinois, Massachusetts and California, and was joined by attorneys general from Arizona, Arkansas, Colorado, Connecticut, District of Columbia, Delaware, Florida, Georgia, Hawaii, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Michigan, Minnesota, Missouri, Nebraska, Nevada , New Jersey, New Mexico, New York, North Carolina, Ohio, Oregon, Rhode Island, South Carolina, Tennessee, Vermont, Virginia, West Virginia and Wisconsin.
Deputy Attorney General John Langmaid and Associate Deputy Attorney General Joe Chambers, Chief of the Finance and Revenue Services Section, assisted the Attorney General in this matter.
Additional Resources About Student Loan Options
The US Department of Education Office of Federal Student Aid (“FSA”) provides information and advice regarding federal student loans, including applying for federal student loans and the repayment and forgiveness process. Click on here submit a complaint or inquiry to the FSA’s Student Loans Ombudsman Panel.
the Consumer Financial Protection Bureau (“CFPB”) provides helpful tools and resources for those preparing for college or repaying student loans. Click on here file a complaint or request with the CFPB.
the Connecticut Department of Banking investigates complaints about student loan servicers, including alleged violations of Connecticut laws relating to student loan servicing, and provides helpful resources for student borrowers. Click on here lodge a complaint or request with the ministry.
Consumers can also file complaints with the Office of the Attorney General at https://www.dir.ct.gov/ag/complaint/.
- Twitter: @AGWilliamTong
- Facebook: CT Attorney General
Media Contact:
Elizabeth Benton
elizabeth.benton@ct.gov
Consumer requests:
860-808-5318
attorney.general@ct.gov
