Thousands of Connecticut student borrowers will receive cash payments as part of a $1.85 billion settlement the state reached with Navient.
In a joint statement with Consumer Protection Commissioner Michelle H. Seagull and Banking Commissioner Jorge Perez, Attorney General William Tong’s office said Thursday the settlement was part of a coalition with 39 attorneys general, who allege that the company engaged in “unfair and deceptive” student loans. practices.
“States claimed that since 2009, despite promising to help borrowers find the best repayment options for them, Navient has pushed struggling student borrowers into costly long-term forbearances and away from debt plans. more affordable income-oriented reimbursements,” the statement read.
In a statement, Mark Heleen, Navient’s chief legal officer, said the claims were unfounded and the company agreed to the settlement “to avoid the additional burden, expense, time and distraction that would prevail in court.” “.
“Navient is and has always been focused on helping student borrowers understand and select the right payment options to meet their needs,” its statement said. “In fact, we’ve increased enrollment in income-contingent repayment plans and reduced default rates, and every year hundreds of thousands of borrowers we support successfully repay their student loans.”
Connecticut officials said 1,339 borrowers in the state will receive $19 million in private debt relief, while another 4,875 borrowers will receive nearly $1.3 million in restitution. The state will also receive more than $141,000 from the settlement, which will be placed in the general fund.
“This settlement will send millions of dollars directly to thousands of Connecticut borrowers who have been deceived by Navient’s abusive practices,” Tong said in a statement, calling the settlement a “massive win for borrowers.”
But the attorney general said the billions of dollars in student loans owed by Connecticut families remain an “insurmountable obstacle” for many, and pledged to continue working on the “financial crisis” caused by the debt.
Tong’s office said it filed the settlement as a motion for stipulated judgment and complaint in state superior court on Thursday. It will require court approval.
States alleged Navient pushed borrowers toward forbearance options, where loan repayments are temporarily suspended or reduced, rather than income-based repayment plans. This meant that borrowers saw interest accrue on their loan balances, rather than getting a discount, interest rate subsidies or low payment options.