Graduates of Bowie State University put messages on their mortarboard hats during the school’s graduation ceremony at the Comcast Center on the campus of the University of Maryland May 17, 2013, in College Park, Maryland. First lady Michelle Obama delivered the commencement speech for the 600 graduates of Maryland’s oldest historically black university and one of the ten oldest in the country. (Chip Somodevilla/Getty Images)
Colorado is one of 39 states to benefit from a $1.85 billion settlement with student loan servicer Navient, Attorney General Phil Weiser announced Thursday.
The state’s payout will provide complete debt relief for over 1,300 Colorado student loan borrowers and $260 each in restitution to nearly 7,000 others. The settlement comes after “widespread unfair, deceptive, and predatory student loan servicing practices,” according to Weiser’s office.
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“Student loan servicers like Navient have an ethical and legal responsibility to inform borrowers of the best repayment options available to them, and to support them as they work to pay back their loans. When they fail to do so, they need to be held accountable,” Weiser said in a statement.
The multistate litigation against Navient alleges that the company guided borrowers who faced financial hardship into long-term forbearance, where they did not have to make payments but interest still accrued on the loan. Additionally, Navient also allegedly issued subprime loans to students attending for-profit schools and schools with low graduation rates, knowing that many of those borrowers would never be able to repay their loans.
Those practices show that Navient “acted without regard for borrowers and their families,” according to Weiser’s office.
The company will cancel loan balances of approximately 66,000 borrowers in the 39 states. It will also pay $650,000 directly to Colorado, intended for future customer protection efforts.
In addition, Navient will be required to notify borrowers of the Department of Education’s Public Service Loan Forgiveness waiver, which lets more public service workers have additional repayment periods count towards loan forgiveness due to the pandemic.
Navient denied violating any law or causing borrower harm.
“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,” the company’s Chief Legal Officer Mark Heleen said in a statement.
Weiser filed the settlement as a proposed consent judgment in Denver District Court on Thursday. Borrowers who are affected by the settlement will receive notice later this year and should make sure their address is updated with the Federal Student Aid office.
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