Several thousand Marylanders will get financial relief under a settlement with the student loan servicer Navient that Attorney General Brian Frosh announced Thursday.
The $1.85 billion settlement, which is joined by 39 attorneys general, is outlined in a consent order filed in Baltimore City Circuit Court on Wednesday.
The complaint against Navient alleged that the company “steered struggling student loan borrowers into costly long-term forbearances instead of counseling them about the benefits of more affordable income-driven repayment plans,” the Attorney General’s Office said in a news release.
The complaint accused Navient of violating the Consumer Protection Act by engaging in unfair, deceptive and abusive trade practices.
Navient also faced allegations that it “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 borrowers would be unable to repay the loans.”
Navient will cancel the balance of more than $1.7 billion in subprime private student loans that is owed by about 66,000 people across the country, according to the release. Another $95 million in restitution payments will go to about 350,000 federal loan borrowers who received certain long-term forbearances.
“We alleged that Navient’s conduct was illegal and burdened struggling Marylanders with additional student debt,” Frosh said in the release. “I am pleased that thousands of Marylanders will receive a significant amount of relief under this settlement.”
The settlement means that more than 1,100 Marylanders will not have to pay more than $34 million in student loan debt, and another 11,836 Marylanders will receive restitution checks, which will total more than $3.1 million.
Frosh’s office announced that federal loan borrowers who could receive a restitution payment will get a postcard in the mail from a settlement administrator in the spring. Eligible federal loan borrowers do not need to take any action, according to the release, except to “update or create their studentaid.gov account to ensure the U.S. Department of Education has their current address.”
Borrowers who are eligible for private loan relief should receive a notice from Navient.
More information about the settlement is at www.NavientAGSettlement.com.
Navient said it did not act illegally, and it did not admit any fault in the settlement.
“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,” said Navient Chief Legal Officer Mark Heleen in a statement.
The agreement requires Navient to offer to estimate income-driven payment amounts for borrowers before placing them into optional forbearances and to train specialists to let borrowers know about alternative repayment programs. It also prohibits the company from pushing customer service agents to minimize the time they spend assisting borrowers.
Navient must also alert borrowers of the U.S. Department of Education’s Public Service Loan Forgiveness limited waiver opportunity, which will temporarily allow public service workers to get credit for past periods of repayment that normally would not qualify for the program.
The Associated Press contributed to this story.