AG Miller announces $1.7 Billion settlement with student loan servicer Navient

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Attorney General Seal

FOR IMMEDIATE RELEASE: Thursday, January 13, 2022
Contact: Ashlee Kieler | communications specialist | 515-281-6710 | | 

AG Miller announces $1.7 Billion settlement with student loan servicer Navient

Iowa borrowers will receive ove$10.2 million in relief 

DES MOINES  — Attorney General Tom Miller announced today that Navient, known as one of the nation’s largest student loan servicers, will provide relief totaling $1.7 billion to resolve allegations of widespread unfair and deceptive student loan servicing practices and abuses in originating predatory student loans. 

This settlement, joined by a coalition of 39 attorneys general, resolves claims against Navient since 2009. Despite representing that it would help borrowers find the best repayment options, Navient steered struggling student loan borrowers into costly long-term forbearances instead of counseling them about the benefits of more affordable income-driven repayment plans, the AGs alleged 

“Today’s settlement finally holds Navient accountable for the harm it caused students and families for more than a decade. This long-overdue relief will help borrowers move forward and set an example for student loan servicers in the future,” Miller said.  

Attorney General Miller filed the settlement as a proposed Consent Judgement today in Polk County District Court. The settlement will require court approval. 

Under the terms of the settlement, Navient will cancel the remaining balance on more than $1.6 billion in subprime private student loan balances owed by approximately 62,000 borrowers nationwide. In addition, a total of $95 million in restitution payments of about $260 each will be distributed to approximately 350,000 federal loan borrowers who were placed in certain types of long-term forbearances. 

As part of the settlement, Iowa will receive a total of $411,851 in restitution payments for more than 1,545 federal loan borrowers. Additionally, Iowa borrowers will receive a total of $10.2 million in private loan debt cancellation. 

According to the attorneys general, the interest that accrued because of Navient’s forbearance steering practices was added to the borrowers’ loan balances, pushing borrowers further in debt. Had the company instead 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). 

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 knowingly ensnared in debts they could never repay. 

For more information on this settlement, click below. 

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