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Attorney General Josh Stein Wins More Than $37 Million in Student Loan Relief for NC Borrowers

For Immediate Release:
Thursday, January 13, 2022

Contact:
Nazneen Ahmed (919) 716-0060

(RALEIGH) – Attorney General Josh Stein announced today that Navient, one of the nation’s largest student loan servicers, will pay $3,259,086 in restitution to more than 12,000 federal loan borrowers in North Carolina. Additionally, 1,267 North Carolina borrowers will receive a total of $33,352,530 million in private loan debt cancellation. The funds are part of a $1.85 billion multistate settlement with Navient to resolve allegations of widespread unfair and deceptive student loan servicing and predatory lending practices.

“More than 13,000 North Carolinians will get student loan relief and a fresh financial start as a result of our settlement today,” said Attorney General Josh Stein. “These people borrowed money so they could get the education they needed to build successful lives, but Navient pushed them toward harmful financial decisions and predatory loans. I’m pleased we’re holding Navient accountable, and I’ll continue to do everything I can to protect student borrowers.”

Federal loan borrowers who qualify for relief under this settlement do not need to take any action except update or create their studentaid.gov account to ensure that the U.S. Department of Education has their current address. For more information, visit www.NavientAGSettlement.com.

Borrowers who will have their private loan debts cancelled will receive a notice from Navient by July 2022, along with refunds of any payments made on the cancelled private loans after June 30, 2021. Federal loan borrowers who are eligible for a restitution payment of approximately $260 will receive a postcard in the mail from the settlement administrator later this spring.

According to the attorneys general, Navient steered borrowers toward forbearance instead of providing them with the help they promised, such as more affordable income-driven repayment plans that could have reduced payments to as low as $0 per month or getting forgiveness for remaining balances after qualifying payments. As a result, borrowers accrued more interest on their loan balances because they opted for forbearance. Navient’s harmful conduct impacted everyone from students who enrolled in colleges and universities immediately after high school to mid-career students who dropped out after enrolling in a for-profit school in the early to mid-2000s.

Navient also allegedly offered 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 to get schools to use Navient as a preferred lender for highly-profitable federal and “prime” private loans. In doing so, the company disregarded the best interests of borrowers and their families, many of whom were unknowingly ensnared in debts they could never repay.

As a result of the settlement, which will require court approval, Navient will:

  • Cancel the remaining balance on nearly $1.7 billion in subprime private student loan balances owed by nearly 66,000 borrowers nationwide.
  • Pay an additional $142.5 million to the attorneys general.
  • Explain the benefits of income-driven repayment plans and offer to estimate income-driven payment amounts before placing borrowers into optional forbearances moving forward.
  • Train specialists who will advise distressed borrowers concerning alternative repayment options and counsel public service workers concerning Public Service Loan Forgiveness (PSLF) and related programs
  • Be prohibited from compensating customer service agents in a way that incentives them to minimize the time they spend counseling borrowers.

The settlement also requires Navient to notify borrowers about the U.S. Department of Education’s recently announced PSLF limited waiver opportunity, which temporarily offers millions of qualifying public service workers the chance to have previously nonqualifying repayment periods counted toward loan forgiveness—provided that they consolidate into the Direct Loan Program and file employment certifications by Oct. 31, 2022.

Attorney General Stein is joined in today’s settlement by the Attorneys General of Pennsylvania, Washington, Illinois, Massachusetts, California, Arizona, Arkansas, Colorado, Connecticut, the 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, Ohio, Oregon, Rhode Island, South Carolina, Tennessee, Vermont, Virginia, West Virginia, and Wisconsin.

A copy of the settlement is available here.

More on Attorney General Stein’s work to protect student loan borrowers:

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