One of the nationâs largest student loan servicers will pay borrowers $95 million, cancel $1.7 billion in debt.
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Thousands of Illinoisans will receive restitution payments and debt cancellations from Navient, one of the nationâs largest student loan servicing companies, under terms of a multistate settlement.
The payouts and debt relief will resolve years-old lawsuits filed by attorneys general from nearly 40 states and provide âsubstantialâ compensation to borrowers, especially those targeted by Navient for so-called âsubprimeâ loans to attend for-profit colleges, Illinois Attorney General Kwame Raoul said at an online news conference Thursday.
âBorrowers overburdened with student loan debt put off buying homes, getting married, starting families,â Raoul said. âBorrowers need to be able to make affordable payments and be provided correct information by the very company paid to provide them the same.â
Illinois in 2017 was one of the first states to sue Navient, when Raoulâs predecessor, Lisa Madigan, filed a lawsuit against the company in state court. The federal consumer protection agency, Consumer Financial Protection Bureau, filed a federal suit, and in the ensuing years, other states launched suits. The settlement announced Thursday still will require approval from a federal judge in Pennsylvania, and the CFPB lawsuit still is ongoing.
Navient did not admit to any wrongdoing as part of the settlement. The company had been one of the largest servicers of student debt, though last year it sought to get out of the business of handling federal student loans.
âThe companyâs 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,â Navient Chief Legal Officer Mark Heleen said in a statement by the company.
The lawsuits alleged Navient made private loans to students who attended for-profit schools with dismal graduation rates despite knowing the students were likely to wind up defaulting on their debts.
When borrowers fell behind, the lawsuits alleged, Navient steered them into forbearance programs, which stalled payments but added to debt as interest charges accrued, instead of counseling them to use income-based payment plans that might have reduced their payments or eliminated some or all of their debt.
Some 18,000 Illinois residents who took out private loans from Navient or its predecessor company, Sallie Mae, will get about $260 each. More than 5,000 residents will receive a total of $133 million in loan forgiveness. Across all states, Navient will pay out a total of $145 million in restitution, though only $95 million will go to payouts, and forgive loans totaling $1.7 billion.
All told, Americans in 2021 were owed a combined $1.73 trillion in student loan debt, a figure that has nearly doubled since 2011. The average student debt for Illinois residents was about $30,000, according to a 2020 report from the Institute for College Access and Success.
Borrowers can learn more about the Navient settlement at https://navientagsettlement.com/.