$4M In RI Student Loans Forgiven In Lender's Settlement With AG

PROVIDENCE, RI — Certain Rhode Island student loan borrowers will see relief from their student loans, thanks to a settlement between the state and Navient, one of the country's largest loan servicers. Rhode Island borrowers will see $4.6 million in relief.

Nationwide, the company will pay $1.85 billion to borrowers nationwide, settling claims filed since 2009 claiming predatory practices. Even thought it claimed to help borrowers find the most affordable repayment options, many were steered toward costly long-term forbearance plans instead of income-driven repayment plans, Attorney General Peter Neronha's Office said.

This settlement, joined by a coalition of 39 attorneys general, resolves claims that since 2009, despite representing that it would help borrowers find the best repayment options for them, Navient steered struggling student loan borrowers into costly long-term forbearances instead of counseling them about the benefits of more affordable income-driven repayment plans.

"There are thousands of student loan borrowers in our state and not one of them deserves to be taken advantage of by their loan servicer," Neronha said. "When a student loan servicer, or any business for that matter, operates as a bad actor and harms Rhode Islanders, this Office will step in to protect them. This settlement will directly benefit hundreds of borrowers in Rhode Island with debt cancellation, and thousands more borrowers by ensuring these practices will not happen again."

The settlement will need to be approved in Providence County Superior Court.

The coalition of 39 state attorneys general said that Navient's practice of encouraging forbearance added interest to loans and caused debt to climb.

"Had the company instead provided borrowers with the help it promised, income-driven repayment plans could have potentially reduced payments to as low as $0 per month, provided interest subsidies, and/or helped attain forgiveness of any remaining balance after 20-25 years of qualifying payments (or 10 years for borrowers who qualify under the Public Service Loan Forgiveness Program)," Neronha's office explained.

Navient was also accused of creating predatory subprime private loans for students at for-profit schools with low graduation rates, "even though the company knew that a very high percentage of such borrowers would be unable to repay the loans," the AG's office said. This practice intended to improve Navient's reputation, encouraging schools to use them for profitable federal and private loans, to their profit.

The settlement will award 226 Rhode Island residents a total of $4.6 million in private debt cancellation. It also requires that Navient reform its practices to counsel borrowers on the benefits of an income-drive repayment plan, and to offer the payment amounts for these plans before moving to forbearance.

Anyone included in the debt cancellation will receive a letter from Navient by July, along with a refund of payments made on canceled loans by June 30. Borrowers do not need to take any action beyond updating or creating a studentaid.gov account to ensure that the U.S. Department of Education has their current address. Read more here.

Visit the Attorney General's website for more information and Frequently Asked Questions about the Navient settlement.