JEFFERSON CITY, Mo. – Missouri Attorney General Eric Schmitt announced earlier this month that one of the nation’s largest student loan servicers has entered a civil settlement agreement with his office and 38 other states.
According to the Attorney General’s website, allegations of deceptive loan servicing came forth and revealed that Navient was taking advantage of students needing assistance to fund their education.
The settlement claims that since 2009, Navient intentionally misled struggling student loan borrowers into more costly, long-term forbearances instead of pursuing more affordable, income-based repayment plans.
Navient has agreed to pay $53 million to Missourians, $2.5 million in restitution and are required to wipe away $51 million in owed debts relating to their deceptive loan servicing.
According to Schmitt, because of Navient’s neglectful practices, the interest that grew over time was added to the borrowers’ loan balances, eventually pushing borrowers into even greater debt.
Navient will now be required to explain all benefits of income-based repayment plans and will be forced to offer estimated income-based payment amounts before placing a borrower into optional forbearances.
Navient will also be required to train employees to advise distraught borrowers on repayment option alternatives. Additionally, this settlement will require Navient to notify a borrower about the U.S. Department of Education’s new Public Service Loan Forgiveness system, which temporarily offers millions of qualifying workers the chance to have previous non-qualifying repayment periods included towards their loan forgiveness.
As a result of the settlement, borrowers who receive private loan debt cancellations will receive a notice from Navient. Borrowers will be refunded of any payments that they made on canceled private loans after June 30, 2021. Federal loan borrowers who will be eligible for restitution payments of $260 will receive a postcard in the mail from a settlement administrator sometime in the spring.
Navient’s full settlement agreement can be viewed here.