AG Racine Announces Navient Will Provide $6.5 Million in Debt Relief & Restitution to DC Student Borrowers Over Unfair Practices

Multistate Settlement Requires Major Loan Servicer to Provide $95 Million in Restitution, Cancel $1.7 Billion in Outstanding Student Debt

WASHINGTON, D.C. – Attorney General Karl A. Racine announced that Navient, one of the nation’s largest student loan servicers, will be required to provide nearly $6 million in debt forgiveness for 190 District residents and over $450,000 in restitution to 1,709 District residents as part of a multistate consumer protection settlement. 

The settlement, joined by a bipartisan coalition of 39 attorneys general, resolves allegations that Navient harmed student borrowers through widespread unfair, deceptive, and predatory practices. It will provide a total of $1.85 billion in relief, including $1.7 billion in debt forgiveness and $95 million in restitution to former students across the country. As part of the settlement agreement, which concludes a nearly five-year investigation into the company, Navient will also reform its practices and pay penalties of $46.9 million to the states, including more than $520,000 to the District of Columbia.

“For years, Navient engaged in deceptive and misleading practices that put its own profits over individuals struggling with student loan debt,” said AG Racine. “This settlement cancels the debt of student debt holders and provides them with restitution for monies they previously paid to Navient.”

Navient was formerly one of the nations’ largest servicers of federal student loans. Until recently, the company had a contract to service federal student loans owned by the U.S. Department of Education. Navient was formed in 2014, when Sallie Mae spun off its loan servicing and collections operations.  OAG issued a subpoena for documents to the company in 2017 and joined a group of attorneys general investigating its servicing practices. 

The multistate investigation found evidence that Navient:

  • Pushed struggling student borrowers deeper into debt: Despite Navient’s claims that it would help borrowers find the best repayment options for them, the company steered struggling student loan borrowers into costly long-term forbearances instead of informing them about more affordable income-driven repayment plans. Borrowers who were steered into forbearance by Navient accrued extra interest on their loans and were pushed further into debt. Had the company instead provided the help it promised, borrowers could have been directed to income-driven repayment plans that could have reduced their payments to as low as $0 per month, provided interest subsidies, or helped attain forgiveness of any remaining balance after 20 - 25 years of qualifying payments (or 10 years for borrowers qualified under the Public Service Loan Forgiveness Program).
  • Made risky loans that it knew borrowers would not be able to repay: Navient allegedly originated predatory subprime private loans to students attending for-profit schools and colleges with low graduation rates, even though it knew that a very high percentage of these borrowers would be unable to repay the loans. Navient allegedly made these risky subprime loans as “an inducement to get schools to use Navient as a preferred lender” for highly-profitable federal and “prime” private loans, without regard for borrowers and their families, many of whom were saddled with debts they would never be able to repay.

Navient also allegedly misallocated and misapplied loan payments; provided false and misleading information to borrowers on multiple topics, including the process to release co-signers from loans, amounts due on delinquent loans, and whether loans could be discharged in bankruptcy; and falsely reported that disabled borrowers had defaulted on their loans when they had actually obtained disability discharges.

Settlement Agreement
The settlement agreement resolves allegations that Navient’s harmful practices violated state consumer protection laws, including the District’s Consumer Protection Procedures Act. Under the terms of the agreement, Navient must:

  • Provide $6.5 million in debt relief to District residents: Under the agreement, Navient will cancel the remaining balance on more than $1.7 billion in subprime private student loan balances owed by approximately 62,000 borrowers nationwide. In addition, a total of $95 million in restitution payments will be distributed to approximately 350,000 federal loan borrowers who were placed in certain types of long-term forbearances. In the District, 190 borrowers will be eligible for cancellation of outstanding balances totaling $5,961,471 and 1,709 borrowers placed in forbearance will be eligible for a total of $455,568 in restitution payments.
  • End its deceptive and misleading practices:  The settlement requires Navient to reform its conduct and cease unfair and deceptive practices in servicing and collecting student loans. It includes terms intended to allow more borrowers to access income-driven repayment plans and Public Service Loan Forgiveness programs; ensure borrowers receive accurate and complete information; and ensure Navient customer service agents are not compensated in a manner that incentives them to minimize time spent counseling borrowers.
  • Notify borrowers of the current opportunity to get closer to public service loan forgiveness: The settlement requires Navient notify borrowers about the U.S. Department of Education’s recently announced PSLF limited waiver opportunity, which temporarily offers millions of qualifying public service workers the chance to have previously nonqualifying repayment periods counted toward loan forgiveness—provided that they consolidate into the Direct Loan Program and file employment certifications by October 31, 2022.

Today’s settlement was led by Pennsylvania, Washington, Illinois, Massachusetts, and California, and was joined by attorneys general in Arizona, Arkansas, Colorado, Connecticut, the District of Columbia, Delaware, Florida, Georgia, Hawaii, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Michigan, Minnesota, Missouri, Nebraska, Nevada, New Jersey, New Mexico, New York, North Carolina, Ohio, Oregon, Rhode Island, South Carolina, Tennessee, Vermont, Virginia, West Virginia, and Wisconsin.

Relief Eligibility
As a result of the settlement, borrowers receiving private loan debt cancellation will receive a notice from Navient, along with refunds of any payments made on the cancelled private loans after June 30, 2021. Federal loan borrowers who are eligible for a restitution payment of approximately $250 will receive a postcard in the mail from the settlement administrator later this spring.

Federal loan borrowers who qualify for relief under this settlement do not need to take any action except update or create their account to ensure U.S. Department of Education has their current address. For more information, visit

Online Student Loan Resources for District Residents
Student borrowers who are struggling with student loans can access free resources about repayment options and how to manage student loan debt at the Office of the Attorney General’s Student Loan Resource Page, including tips on how to avoid student loan scams.