BOSTON — Navient, a major student loan servicing company, has settled allegations of abusive lending practices for $1.85 billion.
The settlement was announced Thursday and could cancel student loans for tens of thousands of borrowers. The deal includes $1.7 billion in debt cancellation and involves 39 state attorneys general, including New York.
Navient has also agreed to pay over $140 million in other penalties.
New York State Attorney General Letitia James said in a release that Navient "deceived thousands of borrowers into costly, long-term, forbearance plans, causing students to pay more than they should have."
“For too long, Navient contributed to the national student debt crisis by deceptively trapping thousands of students into more debt,” said Attorney General James. “Today’s billion-dollar agreement will bring relief to thousands of borrowers in New York and across the nation and help them get back on their feet. Navient will no longer be able to line its pockets at the expense of students who are trying to earn a college degree. Student loan servicers that operate through deception and wrongdoing will not be tolerated and will be held accountable by my office.”
Navient denied acting illegally, and it did not admit to any wrongdoing under the settlement, which is subject to court approval.
“Navient is and has been continually focused on helping student loan borrowers understand and select the right payment options to fit their needs,” Chief Legal Officer Mark Heleen said in a statement.
Under the agreement Navient will cancel the remaining balance on nearly $1.7 billion in subprime, private student loan balances that is owed by 66,000 students. Some loan borrowers will receive restitution payments of $260 each for being placed into certain types of long-term forbearances.
New York will receive about $6.8 million in restitution payments for more than 25,000 federal student loan borrowers.
Borrowers will be notified by Navient if they are receiving a private loan cancellation, as well as any refunds on payments that were made after June 30, 2021. Federal loan borrowers who are eligible for a restitution payment will receive a postcard in the mail later this spring.
(Steve LeBlanc from the Associated Press contributed to this story)