Wisconsin to get nearly $24M in settlement with student loan servicer
MADISON, Wis. (WMTV) - Attorney General Josh Kaul announced Thursday that the student loan servicer Navient will provide $1.85 billion in relief to resolve allegations of widespread unfair and deceptive student loan servicing practices.
In coalition with 39 attorneys general, the settlement resolves claims that since 2009, Navient steered student loan borrowers into costly long-term forbearances instead of counseling them about more affordable income-driven repayment plans.
“A student loan servicer cannot be permitted to engage in deceptive and predatory practices that add to the burdens that families face because of student loan debt,” Kaul said. “This resolution provides meaningful relief to many people who were impacted by Navient’s actions.”
The practices Navient encouraged pushed borrowers into further debt because of additional interest accruing on borrowers’ loan balances, according to the attorneys general. Navient also allegedly originated predatory subprime private loans to students attending for-profit schools with low graduation rates, even though they knew a high percentage of borrowers would be unable to repay the loans.
Under the terms of the settlement, Navient will cancel the remaining balance on nearly $1.7 billion in subprime private student loan balances owned by nearly 66,000 borrowers nationwide. Additionally, Navient will pay $142.5 million to the attorneys general.
A total of $95 million in restitution payments of $260 each will be distributed to about 350,000 federal loan borrowers who were placed in the long-term forbearances.
The Wisconsin settlement will include $1,110,265 in restitution payments for more than 4,165 borrowers. In addition, 953 borrowers will receive a total of $22,776,612 in private loan debt cancellation.
The settlement will require Navient to hold extra trainings for loan specialists and will prohibit compensating customer service agents with incentives to minimize time spent counseling borrowers.
Borrowers receiving private loan debt cancellation will receive a notice from Navient by July 2022 and can expect refunds of any payments made on the cancelled private loans after June 30, 2022.
Federal loan borrowers eligible for a restitution payment will receive a postcard in the mail from the settlement administrator later this spring. Borrowers do not need to take any action except to ensure the US Department of Education has their current address.
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