Navient, one of the nation’s largest student loan services, agreed Thursday to pay nearly $2 billion to settle claims by 38 states and the District of Columbia it deceived thousands of borrows into costly, long-term, forbearance plans that caused students to pay more than they should have.
“They ran a multi-billion dollar scam,” Pennsylvania Attorney General Josh Shapiro said during a news conference announcing the settlement agreement.
Navient, formerly known as Sally Mae, burdened struggling students with debt, the attorneys general said, by pushing them into subprime, private loans they knew most would be unable to repay.
“So many people are trapped in unaffordable student loan debt,” Massachusetts Attorney General Maura Healey said. “These loans were doomed to fail from the start and Navient knew it.”
Navient also steered students into forbearances instead of counseling them about a more affordable repayment plan.
“What Navient did was deceive them,” Washington Attorney General Bob Ferguson. “All they got was a push into a bad plan, this forbearance plan.”
When students stopped making payments, as forbearance allows, the debt piled up. The agreement cancels nearly $1.7 billion dollars in balances owed by 66,000 borrowers nationwide.
Borrowers receiving private loan debt cancellation will receive a notice from Navient, along with refunds of any payments made on the cancelled private loans after…
