Navient, one of the largest student loan servicing companies in the US until 2021, reached a $1.86 billion settlement deal on Thursday with a coalition of 39 state attorneys general. In addition to canceling $1.7 billion in private student loans for almost 66,000 borrowers, Navient agreed to pay $95 million to borrowers who were unduly placed in certain types of long-term forbearances.
Though Navient isn't a lender itself, it managed the student loan repayment process on behalf of the US government. However, Navient chose to end its participation in federal student loan servicing at the end of 2021. Navient was accused of engaging in abusive and deceptive practices during that tenure, including targeting students the company allegedly knew would struggle to pay back loans.
This settlement comes as federal student loan repayments continue to be paused due to the pandemic -- omicron's surge prompted another moratorium extension last month. Federal student loans are on pause until May 1. Moreover, the US Department of Education recently pushed to expand its Public Service Loan Forgiveness Program, which will bring expanded relief to more than 500,000 student borrowers.
"Navient repeatedly and deliberately put profits ahead of its borrowers -- it engaged in deceptive and abusive practices, targeted students who it knew would struggle to pay loans back and placed an unfair burden on people trying to improve their lives through education," Josh Shapiro, attorney general of Pennsylvania, said in a release.
Shapiro added that the settlement corrects corrects Navient's past behavior and puts in place "safeguards to ensure this company never preys on student loan borrowers again."
Navient didn't admit any fault in the settlement and "denies violating any law, including consumer-protection laws, or causing borrower harm," the company said in a statement. The student loan servicer said it's resolving the claims to save on legal costs.
As part of the settlement, Navient agreed to "maintain servicing practices that support borrower success."