Student loan processor Navient, soon to give up its management of federal loans to Maximus, will have to cancel $1.7 billion in student loans and pay the states whose attorneys general sued them for a collective $145 million.
The big question for borrowers: Will their student loans be forgiven?
Navient made a settlement deal with 39 states to cancel student loan debt of students with private loans after being accused of predatory lending practices and giving out the loans to students who would not be able to pay them off.
Following the settlement, Navient released a brief statement regarding the claims that lead to the lawsuits, announcing they’d cancel loan balances for thousands of borrowers. Despite the settlement, the company maintains the claims were unfounded and that the settlement is to avoid additional expenses of time and cost in court actions.
“Navient 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,” a Navient statement said in part. “Navient will notify the affected borrowers and co-borrowers shortly after the agreements receive final court approvals.”
Additionally, Navient will pay a one-time amount of $145 million to the 39 states who sued, with a portion used to reimburse court costs for the states, and the rest intended to be disbursed as payments to now-former borrowers.
There were six lawsuits against Navient, with 39 states signed on. The loans, being private, are different from more familiar student loans received through the system operated by the U.S. government, the Free Application for Federal Student Aid. Unlike FAFSA loans, the Navient private loans were not backed by the federal government.
So, who is eligible for student loan forgiveness?
The students who may benefit from this settlement had to take out loans to go to for-profit colleges such as ITT Technical Institute (closed permanently in 2016 after declaring bankruptcy) and the Art Institute (some campuses still in operation).
According to Navient, states with borrowers potentially eligible for relief include Arizona, California, Colorado, Connecticut, the District of Columbia, Delaware, Florida, Georgia, Hawaii, Iowa, Illinois, Indiana, Kentucky, Louisiana, Massachusetts, Maryland, Maine, Minnesota, Missouri, North Carolina, Nebraska, New Jersey, New Mexico, New York, Nevada, Ohio, Oregon, Pennsylvania, Tennessee, Virginia, Washington and Wisconsin.
“Qualifying federal loan borrowers who were residents of one of the following states or had an address with a military postal code as of January 2017 will be issued a check in the amount of approximately $260,” Navient said. Separately, the company told WFLA that Florida had more than 7,000 borrowers who will be included in the 66,000 getting their loans canceled.
“In the loan cancellation population of 66,000, Florida has about 7,600 borrowers,” a Navient spokesperson told WFLA. “Those are borrowers who took out private student loans at Sallie Mae, largely between 2002 and 2010 and subsequently defaulted.”
The settlement agreement comes shortly before Navient leaves the federal student loan management business, with the loans it is currently serving to be transferred to Maximus, another loan servicer.
Navient will be contacting borrowers who will receive loan cancellation following authorization of the settlement agreement in federal court. Borrowers eligible for a settlement payment will receive a postcard in the mail in the spring, according to Navient.