Navient Student Loan Company has agreed to forgive $1,700 million dollars in private student loans and will pay back $95 millions in restitution, all this after a lawsuit accused the company of further indebting borrowers.
The attorney general of New York, Letitia James, affirmed in a lawsuit, filed simultaneously with the agreement, that since 2009, the company tricked thousands of clients financially strapped for federal debt into opting for expensive long-term forbearance plans rather than informing them of more affordable options available to them.
In the end, borrowers ended up with even more debt instead of opting for income-driven repayment plans, interest subsidies, and even eventual student loan forgiveness after 000 to 20 years.
The attorney general also accused Navient of giving students at colleges with low graduation rates subprime private loans knowing that most of the students could not afford them. Navient used subprime loans in an effort to get schools to choose Navient as their preferred lender.
Without admitting any wrongdoing, Navient settled the lawsuit and agreed to forgive $1,700 million dollars in subprime private loans for 66,000 people throughout the country.
The company will also return $95 million to 260,000 federal loan borrowers, or $260 dollars each, who were allegedly talked into obtaining the expensive leniency.
In addition, will also pay $142 millions to different states, since the agreement was negotiated with a coalition of others 39 state attorneys general.
Navient also agreed to reform its practices by informing borrowers of repayment options based on income.
“Navient will no longer be able to line their pockets at the expense of students trying to get a college degree,” James said, according to the New York Post.
In the settlement, Navient denied all of those claims.