Many student loan borrowers can expect to be compensated due to a vicious repayment scheme.
Bloomberg reports Navient Corp. has reached a $1.85 billion settlement with 39 states for unethical student loan practices, which placed billions of dollars of debt into the hands of its borrowers. Navient Corp. will have to cancel $1.7 billion in private student loans for nearly 66,000 borrowers and pay $95 million in restitution, The New York Times reports.
According to Delaware officials, Navient Corp. was responsible for ensuring its customers would be provided affordable repayment plans. Backing away from their word, Navient Corp. secretly pushed customers to take on expensive payments to be paid over an extended period.
“The bottom line is this: Navient knew that people relied on their loans to make a better life for themselves and for their children,” Pennsylvania Attorney General Josh Shapiro said Thursday, in a press conference, according to Bloomberg. “Instead of helping them, they ran a multimillion-dollar scam.”
Navient Exempts Claims Of Unethical Practice
Many of Navient’s borrowers intent for taking out a private loan attended a college that was owned and operated by a private company or business, The New York Times reports. The schools also cited low graduation rates and below-par job placement records.
According to a legal filing, Navient refers to its private loans as a “baited hook” with the intent of racking in additional federal loans. It is clear Navient’s practice is unethical and shows intent to financially sabotage its borrowers with the intent of profit, but according to reports, Navient claims it did not act illegally.
“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,” said Mark Heleen, Navient’s chief legal officer, according to The New York Times.
Once Finalized, Borrowers Can Expect Repayment Via Mail
The deal will signal an end to a vicious repayment cycle that has spammed two decades. Under the settlement, $260 per person will be allocated to 350,000 federal loan borrowers who were trapped in long-term loan commitments.
The deal awaits approval from the U.S. District Court for the Middle District of Pennsylvania. The attorney general states borrowers who are eligible for repayment will receive it in the mail, according to Bloomberg.