Del., Md. Share In $1.85-Billion Student Loan Settlement

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A settlement with one of the nation’s largest student loan servicers is expected to result in payments going directly to borrowers in many states, including Delaware and Maryland.

Navient has reached a settlement in a case that involved allegations of widespread unfair, deceptive and predatory practices. The settlement totals $1.85-billion.

Attorney General Kathy Jennings said Delaware’s share will amount to about $5.34-million. Maryland Attorney General Brian Frosh says that state’s share will amount to more than $37-million.

“Addressing the student loan crisis is one of my biggest consumer protection priorities,” Jennings said. “We have to recognize that even when the playing field is level, student borrowers are fighting an uphill battle. Between rising tuition and a generation of teenagers who were told that a four-year degree was vital to their success, student debt has become a crisis. With Day One debt burdens sometimes eclipsing six figures, it’s no surprise that thousands of people struggle to make ends meet. At a minimum, loan servicers should be expected to follow the law.”

“We alleged that Navient’s conduct was illegal and burdened struggling Marylanders with additional student debt,” Frosh said.  “I am pleased that thousands of Marylanders will receive a significant amount of relief under this settlement.”

Delaware Attorney General Kathy Jennings’ office provided additional details:


The Delaware Department of Justice played a leading role in investigating Navient’s alleged misrepresentations regarding the dischargeability of private student loans in bankruptcy. Delaware’s investigation focused heavily on a private loan known as a “tuition answer loan,” which typically required borrowers to agree at the time of origination that the loan would not be dischargeable in bankruptcy. The DOJ’s Consumer Protection Unit reviewed promissory notes and interviewed nearly 100 Delaware borrowers during the course of its investigation.

The multistate investigation also reviewed further allegations of misconduct by Navient, including:

  • steering borrowers into expensive â€śforbearances” to avoid default, which did nothing to reduce their existing debt burden or interest rate;
  • failing to direct consumers to alternative repayment options such as income-driven repayment plans or public service loan forgiveness; and
  • originating subprime loans for students attending for-profit colleges with low graduation rates.

According to the attorneys general, the interest that accrued because of Navient’s forbearance steering practices was added to the borrowers’ loan balances, pushing borrowers further in debt. Had the company instead provided borrowers with the help it promised, income-driven repayment plans could have potentially reduced payments to as low as $0 per month, provided interest subsidies, and/or helped attain forgiveness of any remaining balance after 20-25 years of qualifying payments (or 10 years for borrowers qualified under the Public Service Loan Forgiveness Program).

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 unknowingly ensnared in debts they could never repay.

Under the terms of the settlement, Navient will cancel the remaining balance on more than $1.7 billion in subprime private student loan balances owed by more than 66,000 borrowers nationwide. In addition, Navient will pay $142.5 million to the attorneys general. A total of $95 million in restitution payments of about $260 each will be distributed to approximately 350,000 federal loan borrowers who were placed in certain types of long-term forbearances. Borrowers who will receive restitution or debt cancellation span all generations: Navient’s harmful conduct impacted everyone from students who enrolled in colleges and universities immediately after high school to mid-career students who dropped out after enrolling in a for-profit school in the early to mid-2000s.

As part of the settlement, Delaware will receive a total of $400,000 in restitution payments for 1,528 federal loan borrowers. Additionally, 145 Delaware borrowers will receive nearly $4.8 million in private loan debt cancellation.

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. Navient also may not compensate customer service agents in a manner that incentivizes them to minimize time spent counseling borrowers. 

The settlement also requires Navient to notify borrowers about the U.S. Department of Education’s recently announced PSLF limited waiver opportunity, which temporarily offers millions of qualifying public service workers the chance to have previously nonqualifying repayment periods counted toward loan forgiveness—provided  that they consolidate into the Direct Loan Program and file employment certifications by October 31, 2022.

Borrowers receiving private loan debt cancellation will be notified by Navient no later than July 2022; they will also receive a refund of any payments made on the cancelled private loans after June 30, 2021. Federal loan borrowers who are eligible for a restitution payment of approximately $260 will receive a postcard in the mail from the settlement administrator later this spring.

Federal loan borrowers who qualify for relief under this settlement do not need to take any action except to update or create their studentaid.gov account to ensure that the U.S. Department of Education has their current address. For more information, visit www.NavientAGSettlement.com.

This matter was handled for the Delaware Department of Justice by the Attorney General’s Fraud and Consumer Protection Division, including Deputy Attorney General Katherine Devanney, Paralegals Zuri Ramsey and Rhynn Evans, Special Investigator Robert Schreiber, and former Deputy Attorney General Gina Schoenberg, under the supervision of Consumer Protection Director Marion Quirk and Division Director Owen Lefkon.

Maryland Attorney General Brian Frosh’s office also provided additional background:


In a Complaint that accompanied the Consent Order, the Attorney General alleged that Navient engaged in unfair, deceptive, and abusive trade practices that violated the Consumer Protection Act when it steered students into loan forbearance options that added to their debts and were not in their best interests.  Consumers allegedly could have avoided increasing their debts if Navient, as their loan servicer, had steered them to income-driven repayment plans and/or helped them attain forgiveness under the Public Service Loan Forgiveness Program (PSLF).  Navient Corporation 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.

Under the terms of the settlement, Navient will cancel the remaining balance on more than $1.7 billion in subprime private student loan balances owed by approximately 66,000 borrowers nationwide.  In addition, a total of $95 million in restitution payments will be distributed to approximately 350,000 federal loan borrowers who were placed in certain types of long-term forbearances.  More than 1,100 Marylanders will be relieved from having to pay more than $34 million in student loan debt; 11,836 Marylanders will also be receiving restitution checks totaling $3,155,124.

The settlement includes an injunction that requires 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 PSLF and related programs.  The Consent Order also prohibits compensating customer service agents in a manner that incentivizes them to minimize time spent counseling borrowers. 

The settlement requires Navient to notify borrowers about the U.S. Department of Education’s recently announced PSLF limited waiver opportunity, which temporarily offers millions of qualifying public service workers the chance to have previously nonqualifying repayment periods counted toward loan forgiveness – provided that they consolidate into the Direct Loan Program and file employment certifications by October 31, 2022.

Consumers receiving private-loan debt relief under the settlement will receive a notice from Navient.  Federal loan borrowers who are eligible for a restitution payment will receive a postcard in the mail from the settlement administrator later this spring.  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 the U.S. Department of Education has their current address.  For more information, visit www.NavientAGSettlement.com.

Joining Attorney General Frosh in today’s settlement are the attorneys general of Arizona, Arkansas, California, Colorado, Connecticut, the District of Columbia, Delaware, Florida, Georgia, Hawaii, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Massachusetts, Michigan, Minnesota, Missouri, Nebraska, Nevada, New Jersey, New Mexico, New York, North Carolina, Ohio, Oregon, Pennsylvania, Rhode Island, South Carolina, Tennessee, Vermont, Virginia, West Virginia, Washington, and Wisconsin.

Consumers who had student loans serviced by Navient and have questions about today’s settlement may visit https://bit.ly/3K9e0CP for Frequently Asked Questions, or contact the Attorney General’s Consumer Protection Division at 410-528-8662.

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