The student loan collecting company will also have to advise borrowers of their options and explain repayment plans to them as part of a settlement with 39 state attorneys general.
Navient, a major student loan collecting company, agreed to cancel $1.7 billion in debt owed by more than 66,000 borrowers across the US and pay over $140 million in other penalties to settle allegations of abusive lending practices.
That includes the cancellation of $67 million in debt owed by 2,467 Pennsylvanians and $3.5 million in restitution for 13,000 Pennsylvania borrowers.
Pennsylvania Attorney General Josh Shapiro on Thursday announced the settlement between Navient and 39 state attorneys general.
Navient “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,” Shapiro said in a written statement.
“Affording college is hard enough, but when it’s made even harder by an unscrupulous lender who adds costs on the backs of Pennsylvanians, that is unacceptable,” Shapiro said at a news conference. “And those folks who are struggling to make ends meet and continue to pay off debt deserve better than what they got from Navient.”
Among other things, he said, Navient misled borrowers who were having trouble making payments into entering what are known as long-term forbearances, which caused them to run up even more debt.
Forbearance is when lenders allow borrowers to pause or reduce payments for a limited time while they build back their finances. However, interest on the loan continues to accrue and can ultimately cause the amount paid over the life of the loan to be higher.
Navient denied acting illegally, and it did not admit to any wrongdoing under the settlement, which is subject to court approval.
In addition to forgiving tens of thousands of loans, Navient will pay $142.5 million, most of which will go to about 350,000 borrowers who were placed in long-term forbearances.
Also, Navient will be required to do more to advise borrowers of their options and explain repayment plans to them.
Among those who will benefit is Alexis Miller, of Philadelphia. Miller defaulted on about $60,000 in private debt after taking out student loans with Navient to attend the nursing program at Drexel University. With interest and penalties, Miller’s total debt was close to $82,000.
“To say this company tormented me is an understatement,” Miller said during a news conference. “They were never willing to work with me. This company destroyed my credit.”
Miller said the settlement is “life changing.”
“Opportunities that were not an option for me are now possible,” she said.
Borrowers whose loans are canceled will receive notice from Navient along with refunds of any payments made after mid-2021.
The settlement also includes Arizona, Arkansas, California, Colorado, Connecticut, the District of Columbia, Delaware, Florida, Georgia, Hawaii, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Michigan, Minnesota, Missouri, Nebraska, Nevada, New Jersey, New Mexico, New York, North Carolina, Ohio, Oregon, Rhode Island, South Carolina, Tennessee, Vermont, Virginia, Washington, West Virginia, and Wisconsin.
Reporter Ashley Adams contributed to this report.