Borrowers in Iowa could see millions of dollars in student loan debt canceled if a court signs off on a settlement between the state and a student loan provider charged with using unfair, deceptive and predatory lending practices.
Ashlee Kieler, a spokesperson for Miller’s office, said the settlement with Navient is the state’s first with a student loan servicer
“Todays settlement finally holds Navient accountable for the harm it caused students and families for more than a decade. This long-overdue relief will help borrowers move forward and set an example for student loan servicers in the future,” Miller said in a news release.
According to the release, Navient allegedly steered borrowers into more debt instead of into reduced-payment plans or by providing interest subsidies and help attaining loan forgiveness.
Navient is also alleged to have targeted students with predatory subprime private loans at for-profit schools and colleges with low graduate rates – getting people into debt they could not repay while the company collected profits off of the loans.
Subprime loans charge higher interest rates because the borrowers are known to be at a higher risk of not being able to pay the loans back.
Navient did not admit to any fault in the settlement and maintains it did nothing illegal, according to the Associated Press.
Iowa Attorney General Tom Miller’s office announced Thursday that the state is among 37 others and the District of Columbia that have reached a settlement with Navient, a major student loan servicing company
What the company is instead expected to do is pay $1.85 billion – $1.7 billion in debt cancellation for more than 66,000 subprime private student loan borrowers across the country, and another $95 million for restitution payments to approximately 350,000 federal loan borrowers.
In Iowa, Miller’s office said that should translate to $10.2 million of private loan debt being canceled and more than 1,545 borrowers receiving a total of almost $412,000 in restitution.
Kieler added that 434 Iowans will receive debt relief through the settlement, meaning the average amount forgiven per resident will be more than $23,500.
Navient brought in $122 million in net income in the third quarter of 2021, according to a company earnings MO title loans report.
Since 2014, the company has originated $17 billion in private education loans and acquired more than $46 billion of education loans in total, according to another third-quarter 2021 company report for investors.
Miller’s office said in its news release that borrowers having debt canceled through the settlement will be notified by Navient and should receive refunds of any payments made on the canceled loans after .
Federal borrowers who qualify for restitution don’t need to do anything but make sure they have an up-to-date account so the U.S. Department of Education has their current address. Eligible borrowers will receive a postcard in the mail from the settlement administrator later this spring.
Navient is also expected through the settlement to counsel its borrowers and offer cost estimates on cheaper income-driven repayment plans as opposed to long-term forbearances. The company will also be required to train specialists to advise borrowers on alternative repayment options and loan forgiveness programs, according to Miller’s office.
“The conduct reforms imposed by the settlement include prohibitions on compensating customer service agents in a manner that incentivizes them to minimize time spent counseling borrowers,” the attorney general’s news release added.
Navient previously had a contract with the U.S. Department of Education to service a large federal loan portfolio, but the contract was transferred in October to AidVantage, a division of Maximus Federal Services Inc., according to the news release.
Kieler added that though Navient did not admit to wrongdoing, “individual borrowers’ claims are preserved. This means that even if they receive restitution or debt relief under this settlement, they may still sue for legal claims.”