Navient Canceling $1.7 Billion in Private Student Loans

A settlement with one of the nation’s largest student loan servicers includes $1.7 billion in debt cancellation and $95 million in restitution for borrowers.

By , Attorney

Navient, one of the nation's largest student loan servicers, entered into a $1.85 billion settlement with a coalition of 39 state attorneys general to resolve allegations that it:

  • issued subprime private student loans to borrowers when Navient knew they couldn't repay the money and
  • mislead borrowers into forbearances, which stopped borrowers from paying down their loan principal (while still accruing interest).

The settlement includes $1.7 billion in private student loan debt cancellation for around 66,000 borrowers who defaulted and $95 million in restitution for approximately 350,000 federal student loan borrowers.

Claims Navient Made Subprime Loans to Vulnerable Borrowers

Navient allegedly made predatory subprime private loans to students who attended for-profit schools and colleges with low graduation rates, such as ITT Technical Institute and Art Institute schools, knowing that many borrowers would default on their loans. Navient purportedly made these risky subprime loans to induce schools to use Navient as a preferred lender for profitable federal and prime private loans.

Claims Navient Steered Borrowers Into Costly Forbearances

This settlement also resolves claims that, since 2009 (back when the company was known as Sallie Mae), Navient steered student loan borrowers who were having trouble making their loan payments into costly long-term forbearances. The interest that accrued because Navient pushed for forbearances was added to borrowers' loan balances, increasing their debt.

Instead, Navient could have offered borrowers income-driven repayment plans. This kind of plan might have potentially reduced borrowers' payments to as low as $0 per month, provided interest subsidies, and potentially led to loan forgiveness of any remaining balance after 20 or 25 years of qualifying payments (or 10 years for borrowers eligible under the Public Service Loan Forgiveness (PSLF) Program).

How to Get Student Loan Relief From the Navient Settlement

You don't need to take any action to qualify for relief under the agreement, which the court still needs to approve. (Navient has denied wrongdoing and didn't admit any liability as part of the settlement.)

Borrowers who defaulted and will be receiving private loan debt cancellation because of this settlement will receive a notice from Navient by July 2022, along with refunds for any payments made on canceled private loans after June 30, 2021. Federal student loan borrowers who Navient placed in certain types of long-term forbearances will get a postcard in the mail from the settlement administrator and receive a restitution payment of around $260. The settlement also requires Navient to notify borrowers about the U.S. Department of Education's recently announced PSLF limited waiver opportunity.

For more information on the settlement and its terms, go to

Effective date: January 13, 2022