Student loan giant Navient will cancel $1.7 billion in debts owed by approximately 66,000 borrowers as part of the settlement the company reached Thursday with a coalition of 39 states attorneys general.
The agreement announced Thursday will put an end to a series of lawsuits and investigations, which accused Navient of “violating consumer-protection laws” or “causing borrower harm,” according to the Delaware-based company.
Under the terms of the settlement, Navient will cancel loan balances of some 66,000 borrowers with certain qualifying private education loans that were originated largely between 2002 and 2010 and later defaulted and charged off. The company will notify the qualified borrowers in the coming days pending final approval by the court.
In addition to the loan cancellations, Navient will make a one-time $145 million payment to the states. The states are expected to use a portion of that payment to cover their expenses and use the rest to offer affected borrowers some reimbursement.
“The company’s decision to resolve these matters, which were based on unfounded claims, allows us to avoid the additional burden, expense, time and distraction to prevail in court,” Mark Heleen, Navient’s chief legal officer, said in a press release.
Navient also “expressly denies violating any law, including consumer-protection laws, or causing borrower harm,” the company’s release reads.
The settlement comes as progressive advocates and Democratic lawmakers pressure President Joe Biden to fulfil a promise he made on the 2020 presidential campaign trail to cancel at least $10,000 of student debt per person.
“We should forgive a minimum of $10,000/person of federal student loans, as proposed by Senator [Elizabeth] Warren and colleagues,” Biden wrote on Twitter in March 2020. “Young people and other student debt holders bore the brunt of the last crisis. It shouldn’t happen again.”
Since taking office, the Biden administration has provided student loan relief totaling $9.5 billion, a relatively small portion of the $1.7 trillion federal student loans portfolio. In April 2021, Biden’s chief of staff Ron Klain revealed that his boss had asked Education Secretary Miguel Cardona to study whether the U.S. president has the executive authority to cancel student loan debt.
“We’re focused and it’s a priority for me, and for President Biden to make sure that part of the conversation is examining loan forgiveness. Those conversations are continuing,” Cardona told the outlet.
