Navient to Cancel $1.7 Billion in Student Loans in Broad Settlement

Student loan servicing giant Navient reached a $1.85 billion deal with 39 states to settle claims that it made predatory loans that burdened borrowers with crushing debts, promising to settle $1.7 billion in delinquent private student loan debts for nearly 66,000 borrowers and pay $95 million in restitution, The New York Times reported.

Most of those whose loans will be forgiven went to schools managed by major for-profit chains—including ITT, Corinthian Colleges, DeVry University, and Education Management Corporation—that are required by law to derive no more than 90 percent of their tuition payments from federal funding. Both ITT and Corinthian Colleges have collapsed in recent years. Private loans, like those from Navient, were intended to supply that 10 percent and attract students who would take out the lucrative federal loans that for-profit schools relied on, according to the Times. Navient described the private loans as a “baited hook” to bring in more federally backed loans, according to court filings.

Only past-due loans made in and after 2002 at certain for-profit schools or through Navient initiatives will be cancelled, the Times reported. The loans of those who were current on their payments as of June 30, 2021, as well as those who live in 11 states that did not take part in the deal, will not be cancelled.

Navient, based in Wilmington, Delaware, did not admit to any fault in the settlement, and said in a statement that it did not act illegally.

Navient split from Sallie Mae in 2014. Last year, they decided to get out of the federal student loan business, the Times reported, ending its contract with the Education Department and transferring its 5.6 million borrower accounts to a new vendor. They retained a portfolio of private student loans worth billions of dollars, however, and later resumed issuing new loans. Since its split from Sallie Mae, Navient has issued $17 billion in new private loans.

- A. Thomas