Over $10 million headed back to Kansans who borrowed student loans from Sallie Mae

Published: Jan. 13, 2022 at 3:08 PM CST
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TOPEKA, Kan. (WIBW) - Over $10 million is headed back to Kansans who borrowed student loans under Sallie Mae.

On Thursday, Jan. 13, Kansas Attorney General Derek Schmidt said over 400 Kansans will get almost $10.3 million in student loan relief as part of a national settlement with one of the country’s largest student loan services.

AG Schmidt said the $1.85 billion settlement between Navient and a coalition of 39 attorneys general, including the District of Columbia, resolves claims that since 2009, the company steered struggling borrowers into costly, long-term forbearances instead of counseling them about the benefits of more affordable plans.

Schmidt said the company did this despite representing that it would help borrowers find the best repayment options.

“This settlement will provide financial relief to Kansas student loan borrowers who, through no fault of their own, were forced into loan plans that only exacerbated their financial struggles,” Schmidt said.

Navient also allegedly originated predatory subprime private loans to students who attended for-profit schools and colleges with low graduation rates, even though it knew a very high percentage of borrowers would be unable to repay these loans.

Schmidt said Navient allegedly made these risky loans as “an inducement to get schools to use Navient as a preferred lender” for highly-profitable federal and “prime” private loans. Borrowers and their families, many of whom were knowingly ensnared in these debts they could never repay, were never regarded.

Navient told 13 NEWS on Thursday it decided to resolve the matter to avoid the additional burden, expense, time and distraction to prevail in court, despite what it called “unfounded claims.”

“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,” said Navient’s Chief Legal Officer Mark Heleen. “Navient is and has been continually focused on helping student loan borrowers understand and select the right payment options to fit their needs. In fact, we’ve driven up income-driven repayment plan enrollment and driven down default rates, and every year, hundreds of thousands of borrowers we support successfully pay off their student loans.”

Under the terms of the settlement, the Kansas AG said Navient will cancel the remaining balance on over $1.6 billion in subprime private student loan balances owed by about 62,000 borrowers nationwide.

Navient also said the agreements include express denial of the claims and any borrower harm by the company.

In Kansas, Schmidt said 435 borrowers will see $10.282 million in loan balances canceled.

Navient said those Kansas borrowers are ones who took out private student loans from Sallie Mae largely between 2002 and 2010 and subsequently defaulted.

Navient was created in 2014 when the company SLM Corporation, known as Sallie Mae, separates its loan servicing from its consumer banking business. After the separation, the company’s loan servicing and collection operations were re-branded as Navient and the consumer banking business continued as Sallie Mae.

Schmidt said the settlement includes conduct reforms that require Navient to explain the benefits of income-driven repayment plans and to offer to estimate income-driven payment amounts before loan officers place borrowers into optional forbearances.

Additionally, the AG said Naveint will be required to train specialists to advise distressed borrowers about alternative repayment options and counsel public service workers concerning Public Service Loan Forgiveness and related programs.

According to Schmidt, the conduct reforms imposed by the settlement include prohibitions on compensating customer service agents in a way that incentivizes them to minimize time spent counseling borrowers.

As a result of Thursday’s settlement, Schmidt said borrowers who receive private loan debt cancellation will get a notice from Navient, along with refunds of any payments made on the canceled private loans after June 30, 2021. He said federal loan borrowers who qualify for relief under this settlement do not need to do anything except update or create their studentaid.gov account to ensure the U.S. Department of Education has a current address.

For more information about the settlement, click HERE.

Schmidt said he filed a consent judgment for this settlement with Navient in Shawnee Co. District Court. That document can be found HERE.

The AG said this is the latest settlement in his office’s efforts to recover funds for Kansas consumers who have been victims of other deceptive loan practices. Since 2019, he said his office has secured settlements that would have resulted in over $5 million in debt relief for students of former ITT Tech, a for-profit college that filed for bankruptcy that had campuses in Kansas City and Wichita.

To report student loan debt relief schemes, click HERE.

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