By Erik Ortiz -
NBC News
Students who took out loans managed by Navient, one of the largest student loan collection companies in the country, cautiously welcomed the announcement Thursday that tens of thousands of them will see them canceled based on an agreement reached with more than three dozens of states.
The total amount of the debt to be canceled, as well as the restitution agreement that accompanies it,
is valued at about 1,850 million dollars
.
A
bipartisan coalition of state attorneys general
called the ruling "a victory for student borrowers" in holding Navient accountable, after suing the company for defrauding borrowers with deceptive practices and offering subprime loans.
The offices of Navient Wilmington, Delaware. Andrew Kelly / Reuters file
Navient denies violating consumer protection laws or causing harm to borrowers, insisting it is settling the settlement "to avoid the added burden, expense, time and distraction of prevailing in court."
But not all Navient customers will benefit from this settlement, as Mike Pierce, executive director of the Student Borrower Protection Center, a consumer advocacy group, recalled.
On Thursday "a great deal was struck for certain people who have really been forgotten in our national conversation about the student debt crisis," Pierce said.
"This will change the lives of a specific group of those people. But for everyone else, the fight continues," he said.
Who can qualify for debt cancellation?
About 66,000 students with Navient loans can see their debt forgiven.
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These are borrowers with private credit, specifically
subprime student loans
taken out through Navient's predecessor company, Sallie Mae, between 2002 and 2014 (Navient was formed in 2014 after Sallie Mae split into two business entities) .
Those debtors, in addition, must
accumulate more than 7 consecutive months of late payments before June 30, 2021
.
Students who don't have subprime loans may still qualify if they took out their loans privately between 2002 and 2014, and attended a for-profit school that was later vetted under state or federal law.
Affected schools include Corinthian Colleges, DeVry University and ITT Educational Services.
You can find the full list of universities here.
Who is eligible for a restitution payment?
About 350,000 students with federal loans that Navient placed in a long-term forbearance plan may be eligible for an estimated payment of about $260.
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The attorneys general of the states involved say these loans
have pushed students further into debt
because, while they could temporarily suspend or reduce their payments, their loans continued to accrue interest.
However, certain conditions apply to obtaining such reinstatement, such as
having at least one federal loan that is eligible for
income-based repayment and the borrower not having enrolled in income-based repayment prior to the forbearance period.
Borrowers whose federal loans were recently transferred to Aidvantage, another servicer, may still be eligible for reinstatement.
Which states participated in the agreement?
Eligible residents of the following states will benefit from the restitution agreement: Arizona, California, Colorado, Connecticut, Delaware, Florida, Georgia, Hawaii, Illinois, Indiana, Iowa, Kentucky, Louisiana, Maine, Maryland, Massachusetts , Minnesota, Missouri, Nebraska, Nevada, New Jersey, New Mexico, New York, North Carolina, Ohio, Oregon, Pennsylvania, Tennessee, Virginia, Washington, and Wisconsin.
Also included is Washington, D.C.
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In addition, borrowers who qualify for debt cancellation must reside in one of the states listed above or in the following: Arkansas, Kansas, Michigan, Rhode Island, South Carolina, Vermont, or West Virginia.
What should borrowers do?
If a borrower qualifies to cancel the debt or collect the restitution payment, they
will be contacted directly
.
A settlement administrator plans to send debtors a letter by regular mail this spring, with checks expected to go out mid-year.
Borrowers who have private loans forgiven will be contacted in writing in July.
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The agreement between Navient and the states is still pending final court approval.
Meanwhile, do we have to continue paying the loans?
Mike Pierce, the executive director of the Student Borrower Protection Center, recommends continuing to comply with the obligations imposed by a credit or, failing that, consult with an attorney about your options.
Those who signed a federal student loan are still benefiting from a moratorium on such payments until May 1, after the administration of President Joe Biden extended the extension last month.
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But there is indelible good news for those whose debt is forgiven, including under this latest deal with Navient, Pierce stressed.
Student loan forgiveness is tax-free as part of the White House stimulus package signed into law last year.
Previously, any student loan debt written off by the government was taxable.
