State officials have announced a multistate $1.85 billion settlement with student loan servicer Navient and said it will mean millions in debt relief and restitution to thousands of Connecticut borrowers.
Attorney General William Tong, Consumer Protection Commissioner Michelle Seagull and Banking Commissioner Jorge Perez announced the settlement Thursday morning.
Officials said 39 states are involved in the settlement and in Connecticut, 1,339 borrowers will receive $19 million in direct private loan debt relief. Additionally, 4,875 borrowers will receive nearly $1.3 million in restitution.
The state will receive $141,240 in restitution to be deposited into the general fund, according to a news release from Tong’s office.
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Tong’s office said he filed the settlement as a proposed Stipulated Judgment and Complaint today in Hartford Superior Court. The settlement will require court approval.
Officials said that under the terms of the settlement, Navient will cancel the remaining balance on $1.7 billion in subprime private student loan balances owed by more than 66,000 borrowers nationwide and will pay $142.5 million to the attorneys general.
“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’s Chief Legal Officer Mark Heleen said in a statement.
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“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,” the statement goes on to say.
Navient said it will cancel loan balances of approximately 66,000 borrowers with certain qualifying private education loans that were originated largely between 2002 and 2010 and later defaulted and charged off.
The company will notify the affected borrowers and co-borrowers shortly after the agreements receive final court approvals.
In addition, the company said, it will make a one-time payment of approximately $145 million to the states. A portion of that payment will reimburse the states for their costs with the remaining funds to be used by the states to provide payments to certain student loan borrowers as determined by the states.
The company said Navient estimates that these costs are substantially lower than the expected costs of ongoing state-by-state litigation and investigations.
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, according to Tong's office.
They said borrowers receiving private loan debt cancellation will receive a notice from Navient by July, along with refunds of any payments made on the canceled private loans after June 30, 2021, according to Tong’s office. 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 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.
