Navient, once one of the country’s largest student loan servicing companies, reached a $1.85 billion deal with 39 states to settle claims that it had made predatory loans that saddled borrowers with crushing debts they were highly unlikely to repay.
The deal, announced Thursday, requires Navient to cancel $1.7 billion in delinquent private student loan debts for nearly 66,000 borrowers and pay $95 million in restitution. The private loans were crucial to Navient’s ability to make a large volume of lucrative federal loans, prosecutors said.
“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,” said Josh Shapiro, the attorney general of Pennsylvania.
Most of those who took out the loans that will be forgiven under the settlement attended for-profit schools — like the defunct ITT Technical Institute — that often have low graduation rates and poor job-placement records. The private loans were — in Navient’s own words, according to legal filings — a “baited hook” to reel in more federally backed loans.
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