THROUGH Lake Sydney02 February 2022, 21:19
Student Borrowers and the Too Much Talent Band thank President Joe Biden and Vice President Kamala Harris for extending the student loan pause and now demand they cancel student debt at a rally outside the White House, as seen in January 2022. (Photo by Paul Morigi/Getty Images for We The 45 Million)
Don’t get too excited if you’ve seen that Navient, one of the nation’s largest student loan servicing companies, will write off $1.7 billion in student loan debt. While loan service forgiveness will help 66,000 student borrowers across the United States, it is only a small fraction of outstanding student debt.
As of the fourth quarter of 2021, 43.4 million borrowers held a collective debt of $1.61 trillion in federal student loans, according to the Department of Education’s Federal Student Aid Office.
Pennsylvania Attorney General Josh Shapiro announced in mid-January that Navient would write off $1.7 billion in private student loan debt to resolve allegations of deceptive service practices. In September 2021, Navient announced its intention to exit the federal student loan servicing business. According to a statement released by Shapiro’s office, the company was questioned by 39 state attorneys general over “allegations of widespread unfair, deceptive, and abusive student loan administration practices and abuse in the granting of predatory student loans.” “.
The important thing to know is that Navient handles both private and federal student loans — and the company’s latest round of debt forgiveness doesn’t apply to all of its borrowers.
Who will see their debt canceled by Navient?
The entire settlement with Navient is worth $1.85 billion. The majority of this amount, approximately $1.7 billion in forgiveness, will cover the cost of writing off the remaining balance on the subprime private student loan balances of approximately 66,000 borrowers.
According to Navient, borrowers who had loans originated between 2002 and 2010 – and then defaulted – will receive a rebate. Shapiro said borrowers were being hit by two “deceptive and unfair schemes”.
“The first scheme involved Navient making private subprime loans to borrowers who they knew could not repay the money, such as during the 2008 mortgage crisis,” Shapiro said in a statement in January. “The second scheme we uncovered was Navient’s intention to mislead borrowers into forbearances, which prevented them from repaying their loan principal and led to many accumulating more debt and loan payments. endless interest.”
Navient has never admitted or confirmed these allegations, calling them “unsubstantiated claims”. Still, the company is reimbursing borrowers to “avoid the added burden, expense, time and distraction that prevails in court,” Navient chief legal officer Mark Heleen said in a statement.
An additional $95 million from the $1.85 billion settlement will go toward restitution payments of about $260 each to about 350,000 federal student loan borrowers who have been placed in forbearance, according to Shapiro’s office, according to Shapiro’s office. long term.
…and who doesn’t
While about 350,000 borrowers will receive a small paycheck for their forbearance issues, not all Navient federal — or private, for that matter — borrowers will receive forgiveness. Navient has “millions” of federal and private student loan borrowers, with the most recent number being 12 million customers in 2017 totaling $300 billion in student loans.
While hundreds of thousands of Navient borrowers will receive loan forgiveness, millions still will not. The cancellations are also largely for accounts opened in the early 2000s, so if you opened an account with Navient more recently, you’re unlikely to qualify.
More importantly, the cancellations go to Navient’s private student loan customers. Federal student loan customers deemed to have been placed in long-term forbearances receive only a small restitution check.
“We are frustrated that federal student loan borrowers are being crushed by debt despite Navient’s clear history of abuse,” Cody Hounanian, executive director of the Student Debt Crisis Center, said in a statement. “The actions of the predatory student loan industry have damaged a generation’s hopes for a better future, widened the racial wealth gap, and stolen the American Dream in exchange for profits. [The] The announcement is a step in the right direction, but more needs to be done.
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