More than 1,500 Massachusetts borrowers will have their student loans forgiven as part of a $1.85 billion nationwide settlement that Attorney General Maura Healey and 38 other states have reached with student loan company Navient to resolve the allegations that he misled borrowers into entering into costly repayment plans that added to their balances.
The settlement Healey announced Thursday will also yield $6 million for Massachusetts, including $2.2 million in restitution for more than 8,300 federal borrowers in Massachusetts.
“Navient’s piloting process, while quick and easy for Navient, was disastrous for borrowers, and all could have been avoided if Navient had only done what was the right thing to do,” Healey said during from an afternoon virtual press conference where she was joined by two Massachusetts borrowers who may have their student debts erased.
Healey accused Navient of steering student borrowers into forbearance agreements that increased their debt instead of advising them on income-based repayment plans that would have lowered their monthly payments. The settlement will see $41 million in private loans for 1,523 Massachusetts borrowers forgiven.
While Navient denies any wrongdoing, the company’s chief legal officer, Mark Heleen, said he agrees to the terms of the agreement “to avoid the additional burden, expense, time and distraction that would prevail in court.” “.
Thousands of borrowers who were initially rejected when they applied for the Federal Government’s Civil Service Loan Forgiveness Program have been told they will get relief.
“Navient is and always has been to help student borrowers understand and select payment options that are right for them. In fact, we’ve increased enrollment in income-contingent repayment plans and reduced delinquency rates, and every year hundreds of the thousands of borrowers we support successfully repay their student loans,” Heleen said.
Navient is a national, Delaware-based student loan servicer and collector, servicing $300 billion in student loans for more than 12 million private and federal borrowers. The company was formed in 2014 when Sallie Mae split into two entities – Sallie Mae Bank and Navient.
Healey said Navient’s service practices violate state consumer protection laws to prohibit companies from engaging in unfair and deceptive practices, and Arwen Thoman, the student loans ombudsman in Healey’s office and head of the Student Loan Assistance Unit, said it was also against the law in Massachusetts. make loans without reasonable grounds to believe that the borrower will be able to repay.
“This settlement brings us one step closer to healing our broken student debt system,” Healey said.
Although the agreement has been filed in Suffolk Superior Court, it still requires court approval to take effect. Navient said if accepted, it would resolve the six lawsuits brought by the attorneys general against the company, and includes “an express denial of the claims and any harm caused to the borrower by the company.”
Healey, who is set to decide whether to run for governor in 2022, has voiced support for student loan forgiveness, joining U.S. Senator Elizabeth Warren and U.S. Representative Ayanna Pressley last year to ask President Joe Biden to forgive up to $50,000 in student loan debt for federal borrowers.
The White House announced Wednesday that payments on federal student loans will remain suspended until May 1, 2022.
Last April, she called the system “fundamentally flawed” and said her office had used the court system to prosecute predatory lenders and tried to help borrowers restructure payment plans, get their loans out of default. payment and resolve billing disputes.
Kelly Feeherry, one of two student borrowers who joined Healey on Zoom, said she unfortunately attended the New England Institute of Art where she felt she had not only been misled by the school about the access to cutting-edge technology and the promise of success in terms of placement, but also when it came to financial assistance.
“They promised to get me federal loans, which turned out once the bills started coming in, they had basically taken out all the private loans, which were all variable,” Feeherry said.
Healey’s office said Navient used these types of subprime loans offered to Feeherry as “an incentive” for schools to use Navient as their preferred lender for more profitable prime federal and private loans.
Feeherry has six private loans that will be forgiven as a result of the settlement, and said it would help her restore her credit and help her husband buy their family’s first home. She lives in Franklin.
“I’m finally going to be able to contribute a lot more to our family now and invest in my family. I have a four-year-old daughter and I want to see her do great things,” Feeherry said, on the verge of what she described as “tears of joy”.
Another borrower, Heleena Moon, said she took out a loan from Sallie Mae to attend her dream school, Howard University, but after graduating during the recession, she entered into a deferral plan without fully understanding that the interest on his loans would increase.
“It will be an amazing opportunity for everyone,” she said. Moon used to live in Roxbury, but has since moved to Washington, D.C.
Student borrowers eligible for private loan cancellation are expected to receive notice from Navient by July 2022 along with reimbursement of any payments made on loans canceled after June 30, 2021, while restitution checks for $260 $ for eligible federal borrowers will be sent by mid-2022.
Eligible borrowers do not have to do anything to apply for or receive settlement relief, although the Attorney General’s office has advised people to visit the US Department of Education’s website, studentaid.gov, to make sure their address is up to date.
More information on rules and eligibility can be found here.