What does Navient’s settlement mean for student borrowers in Colorado?

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Nearly 7,000 Coloradans forced into onerous student loan repayment terms can expect to receive checks in the mail as early as this week as part of a settlement agreement. Navient, one of the nation’s largest student loan servicers, has been ordered to provide $1.85 billion in borrower assistance nationwide.

The settlement stems from a lawsuit filed by 39 state attorneys general over allegations of predatory lending practices by the company. As part of the settlement agreement, Navient will forgive about $35 million in student loan debt from more than 1,300 Coloradans and send restitution payments to about 7,000 others. For KGNU and Rocky Mountain Community Radio, Shannon Young obtained the details from Colorado State Attorney General Phil Weiser.

SY: First, let’s get all the listeners up to speed on this case, what’s the backstory and how did we get here?

PT: Navient is a company that handles student loan debt, which means that if you are a student and you take on debt to fund your education, chances are Navient is the one handling the debt. And Navient had a responsibility to act legally and fairly, instead they deceived people and engaged in predatory actions, often encouraging and pushing people into schemes, often called forbearance, which accrued additional interest, aggravated the situation of the students while telling people that it was the best choice. So a lot of students and here in Colorado, it’s the 7000 checks that have been hurt by Navient’s conduct. We’ve taken them, and we’re bringing relief.

SY: So go into more detail about what exactly was unfair, deceptive and predatory in Navient’s practices.

PT: Let’s say you’re a student debt borrower, call Navient and say, “I’m interested in my loan plan options because I’m wondering if there are other ways to manage debt. who could ease my debt load? And they say, “Oh, yes, we have a recommendation for you.” The best thing to do is to forbear and pay no debt. And you will be better.

When you tell someone that and don’t say what the real consequence is, “by the way, you’ll keep earning more and more interest on your student loan,” you’re misleading them. What’s worth knowing, basically, is that they were giving loans to people who were hurting other people. (They) were acting really reckless about the consequences for borrowers and their families, trapping people in this debt trap, while misrepresenting what would happen.

Let me give you another second problem that also happened. They would give subprime loans, high interest loans, to students who go to for-profit colleges and colleges that couldn’t get other loans because they knew the students wouldn’t be able to repay the loans.

That’s another problem. When you say to someone, “Oh, I’m going to give you a loan for that education. And I know you can’t pay it back. But I’m just gonna have this saddled around your neck.

These types of borrowing practices, these types of lending practices hurt people. And that is why we acted here.

SY: An important piece of context in this discussion is the Civil Service Loan Forgiveness Program. Can you describe what it is for listeners who may not know it?

PT: The federal government made a promise to public servants, think firefighters, police officers, teachers going to college, who are in debt. The promise is “spend 10 years in the public sector and we will cancel your student loan debt”.

To qualify, you must have these 10 years of qualification. Unfortunately, Navient ended up making decisions that made it harder for people to get the qualifying periods, putting people into ineligible repayment periods when they shouldn’t have.

In this important settlement with Navient, we gave people the ability to go back and revert those time frames back to qualifying time frames. So, if you are interested in this civil service loan forgiveness opportunity and Navient is your student loan manager, you should pay attention. You may be able to get your utility loan forgiveness sooner than not.

SY: In the case of Colorado, why are some loans being canceled outright, and other borrowers getting those $260 restitution checks?

PT: The nature of this settlement was that we basically had to divide people into two categories. In one category were some of the more extreme cases where people were treated in a way that we considered quite egregious. And we were able to push for the type of, call it larger scale loan forgiveness or debt forgiveness.

In other more or less egregious cases, we were able to return that $260 to everyone. I recognize that for many people the damage done by Navient may not be fully repaired by the settlement, but it will go a long way in giving something back to people. In some cases a very meaningful settlement and for others a chance to get their civil service loan program back faster than they otherwise would because they can effectively fix the mistake made by Navient.

SY: In general, are there any red flags that prospective student borrowers should look out for and look for in loans to attend schools?

PT: One of the headlines here, and this is not a new story, if you are going into debt to fund your education, it is important that you are aware of the consequences of that debt, have your eyes open and you recognize that those who may give you this debt do not have your best interest at heart. And in that case, those servicing that debt may not have your best interest. That’s why we have a student loans ombudsman in the attorney general’s office to advocate on behalf of student borrowers. Please visit our website for more information about our student ombudsman so you can be informed and protect yourself.

SY: And finally, besides the consequences, for example, like what the regulation represents, what are the chances of having more meaningful regulation as it relates to this industry in general?

PT: Our office has been a leader in the fight for students and the fight against predatory practices, whether by debt service officers, lenders where applicable, and also for-profit colleges that have benefited the students.

We pushed for fair treatment, including something called the borrower’s defense rule, which means if you’ve been deceived, misled into debt like those for-profit colleges I mentioned earlier, this debt should not be yours to repay when you cannot get the job you were promised, it should be the responsibility of the institution that put you in debt.

So we are pushing for these kinds of reforms. We are now taking an interest in this problem at the Ministry of Education, and we will continue to fight for the students.

This KGNU story was shared with Aspen Public Radio via Rocky Mountain Community Radio, a network of public media stations in Colorado, Wyoming, Utah and New Mexico, including Aspen Public Radio.

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