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Navient plans to cancel debt for some student borrowers.  Who is eligible?

Student borrowers who took out loans managed by Navient, one of the nation’s largest student loan collection companies, were cautiously celebrating Thursday’s announcement that tens of thousands of them would have their loans canceled as part of an agreement with more than three dozen states.

The total amount of debt to be forgiven, along with the restitution agreement that accompanies it, is major – an agreement worth approximately $1.85 billion.

A bipartisan coalition of state attorneys general calls the resolution a ‘victory for student borrowers’ by holding Navient accountable, after it sued the company for allegedly misleading borrowers with deceptive lending practices and offering risky subprime loans . For its part, Navient denies violating consumer protection laws or causing harm to borrowers, insisting it settles the deal “to avoid the added burden, expense, time and distraction that prevails.” before the courts”.

But for the average Navient customer hoping for immediate relief, they may be disappointed, said Mike Pierce, executive director of the Student Borrower Protection Center, a consumer advocacy group.

“Yesterday was a really big deal for some people who were really forgotten in our national conversation about the student debt crisis,” Pierce said. “It will change the lives of a specific group of these people. But for everyone else, the fight continues.”

Who can claim debt cancellation?

About 66,000 student borrowers with Navient loans could have their debts forgiven.

They are borrowers with private loans – specifically, subprime student loans taken out through Navient’s predecessor company, Sallie Mae, between 2002 and 2014. (Navient was formed in 2014 after Sallie Mae spun off into two business entities.)

In addition, these borrowers must have had more than seven consecutive months of past due payments before June 30, 2021.

Student borrowers who do not have subprime loans may still be eligible if their private loans were made between 2002 and 2014 and if they attended a for-profit school that was then subject to enforcement action. federal or state law. These schools include Corinthian Colleges, DeVry University, and ITT Educational Services. A full list can be found on a website for the deal.

Who is eligible for a restitution payment?

About 350,000 federal student borrowers whom Navient placed in a long-term forbearance plan would be eligible for a payment — about $260 per borrower.

State attorneys general have said these forbearance agreements have pushed student borrowers into more debt, because although these borrowers may have suspended or temporarily reduced their payments, their loans continued to earn interest.

Certain conditions apply to obtain repayment, such as having at least one federal loan eligible for income-contingent repayment and the borrower not having registered for income-contingent repayment before the forbearance period.

Borrowers whose federal loans were recently transferred to another manager, Aidvantage, may still be eligible for restitution.

Which states were involved in the settlement?

Eligible residents of the following states will be covered by the return agreement: Arizona, California, Colorado, Connecticut, Delaware, Florida, Georgia, Hawaii, Illinois, Indiana, Iowa, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Minnesota, Missouri , Nebraska, Nevada, New Jersey, New Mexico, New York, North Carolina, Ohio, Oregon, Pennsylvania, Tennessee, Virginia, Washington and Wisconsin. Washington, DC is also included.

In addition, borrowers eligible for debt forgiveness must also reside in one of the above states or in the following states: Arkansas, Kansas, Michigan, Rhode Island, South Carolina, Vermont, and West Virginia.

What actions should borrowers take?

If a borrower qualifies for a debt cancellation or restitution payment, they will be contacted directly.

A settlement administrator is expected to send these borrowers a postcard in the mail this spring, and checks would be sent out in mid-2022.

For borrowers who are about to have their private loans canceled, they would be contacted in writing by July 2022.

The agreement between Navient and the States is still awaiting final court approval.

In the meantime, should borrowers continue to repay their loans?

Pierce recommends borrowers with private loans keep paying or, if they can, seek legal advice about their situation.

Those with federal student loans still have a moratorium on those payments until May 1, after the Biden administration extended the pause last month.

But there is ongoing good news for those whose debt is forgiven, including in this latest settlement agreement with Navient, Pierce said.

Student loan relief is tax-free under the White House coronavirus stimulus package enacted last year. Previously, any student loan debt canceled by the government was taxable.

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