Navient, a major student loan collecting company, agreed to cancel $1.7 billion in debt owed by more than 66,000 borrowers across the U.S. and pay $142.5 million in other penalties to settle allegations of abusive lending practices.
As part of the agreement, Virginia will receive a total of $3.622 million restitution payments for 13,588 federal loan borrowers, according to Virginia Attorney General Mark R. Herring’s office.
Additionally, 1,972 Virginia student borrowers will receive a total of $51.329 million private loan debt cancellation.
“Student loan servicers who use deceptive practices and predatory lending tactics must be held accountable for taking advantage of the hardworking men and women who use their services,” Herring said in a statement. “This agreement will give thousands of Virginians much needed debt relief and ensure that Navient makes substantial changes to their business practices for future student borrowers.”
The settlement with 39 state attorneys general was announced Thursday.
Navient “engaged in deceptive and abusive practices, targeted students who it knew would struggle to pay loans back, and placed an unfair burden on people trying to improve their lives through education,” Pennsylvania Attorney General Josh Shapiro, who helped lead the negotiations, said in a statement.
Among other things, he said, Navient misled borrowers who were having trouble making payments into entering what long-term forbearances, which caused them to run up even more debt.
Forbearance is when lenders allow borrowers to pause or reduce payments for a limited time, but interest continues to accrue and can increase the amount owed.
Navient denied acting illegally, and it did not admit to any wrongdoing under the settlement, which is subject to court approval.
In addition to forgiving tens of thousands of loans, Navient will pay $142.5 million, most of which will go to about 350,000 borrowers who were placed in long-term forbearances.
A total of $95 million in restitution payments of about $260 each will be distributed to approximately 350,000 federal loan borrowers who were placed in certain types of long-term forbearances.