TOPEKA – (January 13, 2022) – More than 400 Kansans will receive nearly $10.3 million in student loan relief as part of a nationwide settlement with one of the country’s largest student loan servicers, Kansas Attorney General Derek Schmidt said today.
Schmidt said the $1.85 billion settlement between Navient and a coalition of 39 attorneys general, including the District of Columbia, resolves claims that since 2009, despite representing that it would help borrowers find the best repayment options, the company steered struggling student loan borrowers into costly, long-term forbearances instead of counseling them about the benefits of more affordable plans.
“This settlement will provide financial relief to Kansas student loan borrowers who, through no fault of their own, were forced into loan plans that only exacerbated their financial struggles,” Schmidt said.
Navient also allegedly originated 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 as “an inducement to get schools to use Navient as a preferred lender” for highly-profitable federal and “prime” private loans, without regard for borrowers and their families, many of whom were knowingly ensnared in debts they could never repay.
Under the terms of the settlement, Navient will cancel the remaining balance on more than $1.6 billion in subprime private student loan balances owed by approximately 62,000 borrowers nationwide. In Kansas, 435 borrowers will see $10.282 million in loan balances canceled.
Navient was created in 2014 when the company SLM Corporation (known as Sallie Mae) separated its loan servicing from its consumer banking business. After the separation, the company’s loan servicing and collection operations were re-branded as Navient, and the consumer banking business continued under the Sallie Mae brand.
The settlement includes conduct reforms that require Navient to explain the benefits of income-driven repayment plans and to offer to estimate income-driven payment amounts before placing borrowers into optional forbearances. Additionally, Navient must 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. The conduct reforms imposed by the settlement include prohibitions on compensating customer service agents in a manner that incentivizes them to minimize time spent counseling borrowers.
As a result of today’s settlement, 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 June 30, 2021. 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 U.S. Department of Education has their current address. For more information and a list of frequently asked questions, visit www.NavientAGSettlement.com.
Schmidt filed a consent judgment for the settlement with Navient in Shawnee County District Court today. The document can be found at https://bit.ly/3FrEkEy.
The settlement is the latest effort Schmidt’s office has taken to recover funds for Kansas consumers who have been victims of other deceptive loan practices. Since 2019, Schmidt’s office has secured settlements that have resulted in more than $5 million in debt relief for students of the former ITT Tech, a for-profit college that filed for bankruptcy that had campuses in Kansas City and Wichita.
Consumers should report student loan debt relief schemes to the attorney general’s office at www.InYourCornerKansas.org or by calling (800) 432-2310.