Thousands of Connecticut student loan borrowers will receive some restitution under a multistate settlement with Navient, a loan servicer accused of predatory lending practices, Attorney General William Tong announced Thursday.
Tong, along with attorneys general in 38 other states, reached a $1.85 billion settlement with the loan-servicing company addressing allegations that it directed struggling borrowers into high-priced forbearances rather than cheaper plans since 2009.
Here in Connecticut, $19 million will be directed to helping more than 1,300 borrowers, another $1.3 million will fund restitution to 4,875 borrowers, and $141,000 will be deposited in the state’s General Fund.
In a press release, Tong called the settlement a “massive victory for borrowers.”
“Navient steered borrowers to costly payment plans, and away from reasonable and affordable options and programs. Their predatory loans left thousands of Connecticut families saddled with unaffordable debt,” Tong said. “This settlement will send millions of dollars directly to thousands of Connecticut borrowers who were deceived by Navient’s abusive practices.”
Consumer Protection Commissioner Michelle Seagull said that the exciting milestone of earning a college degree too often becomes a devastating burden for borrowers.
“We know this settlement will help many people who entered into costly loan agreements they are still struggling to pay off,” Seagull said.
The settlement requires Navient to cancel the balances of more than 66,000 borrowers nationwide, totaling around $1.7 billion. Meanwhile, about 350,000 federal loan borrowers will receive $260 restitution payments.
In a separate statement, Navient announced the settlement and denied breaking consumer protection laws or causing harm to borrowers. In the press release, Mark Heleen, the company’s chief legal officer, called the claims against Navient “unfounded” and said the decision to settle the case was an effort to avoid the additional “burden, expense, time and distraction” of a protracted court battle.
“Navient is and has been continually focused on helping student loan borrowers understand and select the right payment options to fit their needs,” Heleen said.