Navient, one of the largest student loan managers, will cancel $1.7 billion in private student loans after a deal reached with 39 states.
The settlement, announced Thursday, stemmed from accusations that the lender had made loans to millions of borrowers who were unlikely to be able to repay them. It resolves the six pending lawsuits against Navient, company officials said.
The loans in question are private loans, that is, they are not guaranteed by the federal government. As part of the settlement, the company will make a one-time payment of approximately $145 million to the states.
Nearly 66,000 borrowers are expected to get their loans cleared under the $1.85 billion deal.
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“At last, student borrowers who had been forced to bear the burden of dangerous and predatory private student loans made by Sallie Mae and held by Navient will finally be free of their debts,” said Mike Pierce, Executive Director of Student Borrower . protection center. The company was created in 2014 by splitting Sallie Mae into two entities: Sallie Mae Bank and Navient.
As part of the settlement, Navient denied violating the law.
“The company’s decision to resolve these issues, which were based on unsubstantiated claims, allows us to avoid the additional burden, expense, time and distraction that prevails in court,” said Mark Heleen, chief legal officer of Navient.
Navient shares rose 0.08% on Thursday, trading at $21.98.
As the cost of higher education rises, more Americans are turning to private student loans.
The private student loan market has grown by more than 70% over the past decade and is worth approximately $130 billion, according to a recent report from the Student Borrower Protection Center.
At the end of 2019, Americans owed more on private student loans than on overdue medical debt or payday loans.