Washington AG reaches $45M settlement with student loan servicer

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Washington state Attorney General Bob Ferguson announced that student loan servicer Navient will pay $45 million in debt relief, restitution and costs to settle the state’s lawsuit against them.

The announcement is part of a larger settlement of $1.85 billion in lawsuits brought by several state attorneys general that accused the company of engaging in unfair practices and making predatory loans to students who were unlikely able to repay the money.

Washington, along with Illinois, was the first state to file suit against Navient in January of 2017.

The agreement means that Navient will erase more than $35 million in loan debt for more than 1,400 Washington residents who took out private loans with the company between 2002 and 2014, an average of about $25,000 per person.

Navient must also pay $2.3 million in restitution to approximately 8,900 Washington borrowers who were enrolled in forbearance for an extended period of time between 2009 and 2017 and pay the state $7 million to cover the cost of the multi-year investigation and litigation.

“Higher education should not equal a lifelong debt sentence — and student loan corporations do not have the right to deceive Washingtonians to maximize their profits,” Ferguson said in a press release Thursday. “We are holding the country’s largest student loan servicers accountable, achieving hard-fought corporate reforms and helping repair the damage they did to Washington borrowers.”

Forbearance allows borrowers to temporarily suspend making payments, but interest on the loan continues to accrue. When payments are resumed, the accumulated interest is added to the loan principal, effectively meaning borrowers end up paying interest on their initial interest.

Income-driven plans, on the other hand, are structured monthly payments of principal and interest that move toward loan payoff over a given number of years.

Ferguson was the first attorney general to obtain a court ruling that Navient broke the law when King County Superior Court Judge Veronica Galvan issued an order in May of 2021 saying the company violated Washington’s Consumer Protection Act.

A press release issued by Navient said the company in the agreement “expressly denies violating any law” and will maintain servicing practices that support borrower success.

“The company’s 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,” Navient Chief Legal Officer Mark Heleen said in the statement. “Navient is and has been continually focused on helping student loan borrowers understand and select the right payment options to fit their needs. In fact, we’ve driven up income-driven repayment plan enrollment and driven down default rates, and every year, hundreds of thousands of borrowers we support successfully pay off their student loans.”





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