NEWARK Acting Attorney General Andrew J. Bruck and the Division of Consumer Affairs today announced that New Jersey student loan borrowers will receive over $60 million in relief from a settlement with Navient Corp. and its subsidiary Navient Solutions LLC that resolves a 2020 lawsuit filed by the state against the student loan servicing giant. The state's lawsuit alleged that Navient engaged in unconscionable commercial practices, deceptive conduct, and misrepresentations when servicing thousands of New Jersey consumers' student loans over the past decade boosting company profits at the expense of struggling borrowers.
The Navient settlement includes approximately $57.2 million in debt relief and $3.1 million in restitution payments to New Jersey borrowers, as well as a $3 million payment to the state.
New Jersey's settlement is part of a nationwide settlement of claims by 38 states and the District of Columbia alleging widespread abuses in Navient's student loan origination and servicing business. The total value of the nationwide settlement is approximately $1.85 billion.
Navient, formerly known as Sallie Mae, was one of the nation's largest servicers of both federal and private student loans, until partially exiting the business in September 2021. Student loan servicers are a critical link between borrowers and lenders. In addition to managing borrowers' accounts and processing their monthly payments, student loan servicers are responsible for assisting financially struggling borrowers to enroll in alternative repayment plans or request a modification of loan terms from lenders.
Too many New Jerseyans have struggled to pay off their student loans, Bruck said in a release. And too many of those borrowers have had a harder time because their student loan servicer put corporate profits above their best interests. With today's settlement, we are holding one of the country's largest student loan servicers accountable, and we are putting millions of dollars back in our residents' pockets.
The average New Jersey borrower carries $35,730 in student debt, among the highest in the country, according to some sources. Statistics show that certain groups of borrowers are particularly at risk.
In 2019, the New York Federal Reserve found that borrowers in Black-majority zip codes are more likely to borrow to fund their education, have higher average loan balances, and fall into default at almost double the rate of white-majority zip code borrowers. Moreover, the findings show that borrowers who received Pell Grantsmost of whom have family incomes below $40,000were five times as likely to default within 12 years; borrowers whose parents did not attend college were more than twice as likely to default than borrowers whose parents did attend college; and borrowers who began their education at for-profit colleges defaulted at seven times the rate of those who attended public colleges.
Student loan borrowers who thought college would be a path to success instead found themselves on the road to financial ruin as a result of Navient's unlawful conduct, Acting Director of the Division of Consumer Affairs Sean P. Neafsey said. Navient's failure to provide fair and honest services to New Jersey borrowers violated consumer protection laws and heaped more debt on individuals who could least afford it. The settlement announced today holds Navient accountable for its unconscionable conduct and provides meaningful financial relief to the borrowers harmed by it.
In its civil suit against Navient, the state alleged that instead of fulfilling its legal obligation to student loan borrowers Navient put its own financial self-interests first through deceptive and unconscionable tactics that at various times over the last decade have included:
Borrowers who will receive restitution or forgiveness span all generations: Navient's harmful conduct impacted everyone from students who enrolled in colleges and universities immediately after high school to mid-career students who dropped out after enrolling in a for-profit school in the early 2000s. Parents or grandparents who co-signed their children or grandchildren's subprime loans will also receive relief.
Approximately 2,040 New Jersey borrowers will receive a total of $57,234,256 in debt cancellation and another 11,522 New Jersey borrowers will receive a total of $3,071,421 in restitution payments.
The settlement also requires Navient to notify borrowers of the Department of Education's important changes to the Public Service Loan Forgiveness program, which offers millions of qualifying public servants a waiver that may count past payments towards loan forgiveness. The Attorney General encourages all New Jersey residents who work in the government or non-profit sectors to review the PSLF website to determine whether they might qualify for loan forgiveness.
On October 20, 2021, Navient's contract to service 5.6 million loans owned by the U.S. Department of Education was transferred to Maximus/AidVantage. Following completion of this transfer, Navient will continue to service its existing portfolio of private student loans and legacy Federal Family Education Loan program loans issued before the FFEL program ended in 2010.
Consumers do not need to take any action to receive the benefits required under the settlement. Consumers receiving private loan debt cancellation will receive a notice from Navient, and they will receive refunds of any payments made after June 30, 2021.
Consumers who are eligible for a restitution payment will automatically receive a restitution check of approximately $260 from the Attorney General's settlement administrator in mid-2022. To ensure the settlement administrator can find you, federal loan borrowers who may be eligible for a restitution payment are encouraged to update their contact information in their studentaid.gov account or create an account if they do not already have one. For additional information, please visit the settlement website at www.NavientAGSettlement.com.
