My Deep Dive Into What Navient’s Student Loan Settlement Agreement Actually Says
There has been a lot of stories that have appeared about the Navient student loan settlement agreement that will forgive student loans but let’s look at what it actually says.
The hype has been $1.7 billion in student loans will be forgiven but as always, the devil is in the details.
The Attorney General settlement agreement says it has “resolved the matters in controversy between them and have consented to the terms of this judgment without trial or adjudication of fact or law, and without any admission or finding of liability or wrongdoing or admission or finding of any violation of law as alleged by Plaintiff and denied by the Navient Parties and [General Revenue Corporation]. The Signatory Attorneys General, as that term is defined herein below, and the Navient Parties each agree more can be done to improve student loan customer outcomes.”
General Revenue Corporation is a subsidiary of SinglePoint Group International USA, Inc. and a former subsidiary of Navient Corporation.
Who Does the Navient Settlement Agreement Benefit?
The settlement agreement seems to make it clear this benefits Navient. The agreement says, “This Consent Judgment is intended to be for the benefit of the Navient Parties and other parties hereto and does not create any other third-party beneficiary rights or give rise to or support any right of action by any consumer or group of consumers or confer upon any person other than the parties hereto any rights or remedies. This document and its contents are not intended for use by any third party for any purpose, including submission to any court for any purpose, unless otherwise ordered by a court of competent jurisdiction.”
Navient still has the ability to go after consumers. “This Consent Judgment shall not be construed or used as a waiver or limitation of any defense or claim otherwise available to the Navient Parties or GRC in any other action, or of their right to defend against, or make any arguments in, any private individual action, class claims or suits, or any other governmental or regulatory action relating to the subject matter or terms of this Consent Judgment.”
That appears to continue to make it difficult for consumers to pursue any action against Navient or prevent beings sued over any loan issue.
What States Does the Agreement Cover?
“The Signatory Attorneys General, the Navient Parties, and GRC (collectively, the Parties) acknowledge that similar resolutions have or will be entered into between the Navient Parties, GRC, and the Signatory Attorneys General for other States, including, without limitation, the States of Arizona, Arkansas, California, Colorado, Connecticut, Delaware, Florida, Georgia, Hawaii, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Missouri, Nebraska, Nevada, New Jersey, New Mexico, New York, Ohio, Oregon, Pennsylvania, Rhode Island, South Carolina, Tennessee, Virginia, Washington, West Virginia, Wisconsin, and the District of Columbia.”
Navient Not Responsible for Individual Account Errors
“Errors on individual borrower accounts shall not be the basis for any claim or found to be material non-compliance for purposes of this Consent Judgment.”
Navient Will Change Its Ways About Servicing Federal Student Loans
Navient ditched all its federal student loan accounts to Aidvantage. They are only holding on to servicing FFELP (Federal Family Education Loan Program) loans held by private companies but backed by the federal government.
Payment Application Instructions
“One-Time and Standing Instructions from Borrowers or Cosigners Regarding Processing Payments. Allow borrowers and cosigners to provide one-time or standing instructions regarding payment allocation on any loan or billing group.”
However, this might now be the case for the individual borrower. “Notwithstanding any specific requirement set forth above, no provision of this Consent Judgment shall require the Navient Parties to apply allocation instructions that conflict with the terms of a borrowers promissory note or federal requirements.”
Private Student Loans and Bankruptcy
The issue of private student loans being discharged in bankruptcy is changing with this agreement. “The Navient Parties shall not inform borrowers that private loans are non-dischargeable in bankruptcy or unlikely to be dischargeable in bankruptcy. The Navient Parties shall establish policies and procedures to ensure that they direct borrowers who raise the issue of bankruptcy to discuss the potential for loan discharge with bankruptcy counsel.”
Private Student Loan Forgiveness
Here is the most critical part of the agreement in my opinion. This is the headline most consumers read about — private loan forgiveness.
The agreement says, “The Navient Parties shall discharge and forgive a minimum of $1,710,000,000.00 (One Billion Seven Hundred Ten Million U.S. Dollars) of private educational loans meeting the criteria set forth.”
Private Student Loan Forgiveness Criteria
The Navient Parties agree to discharge and forgive not less than $1,710,000,000.00 of private education loans meeting the categories and criteria below as of June 30, 2021 (Debt Relief Forgiveness Date).
In order to qualify for Categories 1 through 3, below, a private education loan must be charged-off (The Navient Parties policy for Charge-off accounts due to delinquency requires a loan to be charged-off by the end of the month in which the interest on or principal of that loan becomes 212 days or eight billing cycles past due, whichever is earlier.) as of the Debt Relief Forgiveness Date (Past Due Status); and (1) have reached Past Due Status no more than seven years prior to the Debt Relief Forgiveness Date, or (2) be within the applicable statute of limitations based on the borrowers last known address as of the Debt Relief Forgiveness Date.
If a private education loan has reached Past Due Status more than seven years prior to the Debt Relief Forgiveness Date, but the borrowers address is unknown or unavailable to determine the appropriate statute of limitations, then the loan is included in each respective Category if the borrowers last known address is in one of the Signatory Attorney General States, or a military address postal code as of the Debt Relief Forgiveness Date.
The discharged and forgiven amount shall include all outstanding principal, accrued interest, and fees from Categories 1 through 3 qualifying private education loans made to borrowers with a last known address in one of the Signatory Attorney General States, or a military address postal code.
Category 1 Criteria: All Opportunity & Recourse Loans
Any private education loan with an outstanding balance and in Past Due Status as of the Debt Relief Forgiveness Date, originated under an Opportunity or Recourse program, and disbursed after 2002.
Category 2 Criteria: For-Profit Schools
Any private education loan with an outstanding balance and in Past Due Status as of the Debt Relief Forgiveness Date disbursed by SLM Corporation lenders, subsidiaries, predecessors, successors, and/or its affiliates after 2002 to a borrower attending a for-profit school owned or operated by one of the companies listed below, or under one of the trade names listed below, or any other company as agreed to by and among the Parties:
- ABC Training Center of Maryland
- Alta College
- Apollo Group
- ATI Enterprises
- Bridgepoint Education
- Career Education Corporation
- Center for Excellence in Higher Education
- Corinthian Colleges
- DeVry University
- Education Corporation of America (Willis Stein & Partners III, L.P.)
- Education Management Corporation
- MN School of Business
- Graham Holdings
- Infilaw Holding
- ITT Technical Institute
- Lincoln Tech
- Marinello School of Beauty
- Premier Education Group
Category 3 Criteria: Non-traditional
Any non-traditional private education loan with an outstanding balance and in Past Due Status as of the Debt Relief Forgiveness Date disbursed by SLM Corporation lenders, subsidiaries, predecessors, successors, and/or affiliates after 2002. Non-traditional as used herein means a private education loan disbursed (1) to a borrower with a FICO score below 670 at origination to attend a private for-profit educational institution; or (2) to a borrower with a FICO score below 640 at origination to attend a public or a private not-for-profit educational institution.
Applies to Loans Disbursed Before 2009
“The Navient Parties represent and warrant that most of the loans subject to these provisions were made prior to 2009 by then-lending partners or by current or former subsidiaries or predecessors of the Navient Parties.”
No Need to Notify Borrowers Quickly
Navient is supposed to identify all private education loans that would fall under the forgiveness program within 30 days of January 12, 2021, but they do not need to notify borrowers until months into the future.
Eventually, borrowers that may be eligible will receive a notification that looks like this.
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Payments made on these loans before June 30, 2021 will not be refunded.
Navient Will Not be Sued by Any Participating States
“The Signatory Attorneys General release the Navient Parties and GRC, with their respective past and present subsidiaries, predecessors, successors, agents, owners, employees, officers, trustees, and members (collectively, the Released Parties) from all civil claims any Signatory Attorney General could have brought pursuant to the state consumer protection laws of the Signatory Attorneys General and/or 12 U.S.C. 5552, based on the Covered Conduct, as that term is defined below, prior to the Effective Date of this Consent Judgment, including any claim under common law, statute, or ordinance.”
The agreement does not stop the suit brought by the Consumer Financial Protection Bureau against Navient.
The bad behavior that will no longer be pursued by the States is described as “Covered Conduct,” as used in this Release, Section VII of this Consent Judgment, means the Released Parties acts and practices, including representations and omissions to consumers, related to the following student loan servicing, origination, and collection acts or practices, for federal or private student loans, up until the Effective Date, unless otherwise provided herein:
- communications regarding repayment options;
- communications encouraging borrowers to contact any Navient Party for assistance repaying loans; or representing that any Navient Party would counsel, help, assist, or otherwise work with a borrower to select a repayment plan;
- placing federal student loan borrowers in discretionary forbearances;
- policies or practices related to incentive compensation for employees or agents of the Released Parties responsible for communicating with borrowers telephonically;
- communications regarding recertification for IDR Plans or other alternative repayment options, and processing or enrollment in any such plan or alternative repayment option;
- communications, including but not limited to monthly billing or account statements, regarding the amount currently due on an account, the amount due under any future payment plan or contemplated payment plan, pay-off amount, or any use of the phrase present amount due;
- payment processing, including payment allocation and application, and website functionality to control payment allocation and application;
- instructions provided to borrowers or cosigners on where to send payments;
- late fee billing disclosures;
- communications regarding federal student loan disability discharge, or credit reporting related to federal student loan disability discharge;
- communications regarding the federal student loan rehabilitation program;
- communications regarding requirements and eligibility for PSLF;
- the terms of promissory notes relating to release of cosigners on cosigned loans;
- communications with borrowers or cosigners regarding the release of cosigners on cosigned loans and/or the acceptance or denial of a cosigner release application;
- the timing, frequency, or manner of outbound telephone calls to any consumer;
- communications relating to loan payoffs or deceased cosigners;
- communications regarding bankruptcy discharge of student loans, late fees, payoff fees, collection fees, or forbearance fees;
- conduct prior to April 30, 2014 relating to the marketing, origination, processing, underwriting, decisioning, and/or disbursement of private student loans by the Navient Parties, SLM Corporation, and any affiliated entity, subsidiary, or predecessor of those entities involved in the origination of student loans, including but not limited to entry into preferred lender agreements, entry into contracts with institutions of higher education and/or any company operating such institutions, and the origination of private student loans to borrowers who did not qualify for such loans under standard underwriting criteria; and
- conduct related to the effects of repayment options on FFELP loan securitizations including but not limited to disclosures related to the offering of the underlying securities in such securitizations.”
There Are Many Unanswered Questions But Navient Wins
As far as I am aware this is the only agreement that defines what the settlement actually means for consumers. Since Navient ditched its federal student loan servicing to Aidvantage, it sure seems like a lot of this no longer applies to a large amount of accounts Navient was servicing. They don’t have them anymore.
When it comes to private loans, payments made before June 30, 2021, will not be refunded and it looks like consumers have little control over any forgiveness that might be available.
Federal loans will not be forgiven.
Originally published at https://getoutofdebt.org on January 24, 2022.