Navient to cancel 70K student loans, pay $1.85 billion in settlement

An agreement between a coalition of state attorneys general and Navient, one of the largest student loan companies in the U.S., resulted in a settlement that will forgive loans for 66,000 borrowers. 

The agreement announced on Thursday concludes several state lawsuits and cancels loans worth a total of $1.7 billion, according to The Wall Street Journal. The private education loans forgiven were mostly issued between 2002 and 2010 before they were defaulted. 

In addition to the loan cancellations, Navient will make a one-time $145 million payment to the states, the company said.

“The company’s decision to resolve these matters, which were based on unfounded claims, allows us to avoid the additional burden, expense, time and distraction to prevail in court,” Navient’s chief legal officer, Mark Heleen, said in the company’s press release.

As part of the agreement, Navient “expressly denies violating any law, including consumer-protection laws, or causing borrower harm,” the company’s release added.

Pennsylvania Attorney General Josh Shapiro (D) said in a statement that Navient had “repeatedly and deliberately put profits ahead of its borrowers” and added that the company “engaged in deceptive and abusive practices, targeted students who it knew would struggle to pay loans back, and placed an unfair burden on people trying to improve their lives through education.” 

Navient will also pay $95 million to roughly 350,000 federal loan borrowers in long-term forbearance programs, or about $260 each, according to Shapiro’s statement.

Those programs caused borrowers to accrue more debt rather than moving into income-based repayment plans, the Journal reported.

The settlement comes as advocates and lawmakers increase pressure on President Biden for a course of action toward student loan forgiveness.

The White House’s recent extension of the pause on student loan repayments as a result of spiking COVID-19 cases has increased optimism about the Biden administration acting on the issue.