The Frugal Creditnista

Is Navient Student Loan Forgiveness the First Domino to Fall?

It was a celebration heard across the country: Navient, one of the largest student loan lenders, is set to forgive more than $1.7 billion in subprime loans per court orders. For more than 66,000 borrowers, the ruling provides financial burden relief they’ve been anxiously hoping for. So, what comes next?

There are still a lot of details that are clouded in confusion. Here’s what we know so far about the Navient forgiveness.

Not All Navient Student Loans Will Be Forgiven

First and foremost, if you have a student loan through Navient, don’t start celebrating just yet. Not all loans will qualify for forgiveness, so you may still be required to finish out your loan terms.

The reason is because of how the lawsuit against Navient came to fruition. The lawsuit alleges that Navient crossed into criminal territory with loan mismanagement, unfair lending practices, and deception. The company has been accused of approving loans for borrowers who they knew would not be able to repay them, but approved them anyway because they wanted to become a school’s preferred lender. They’ve also made it a habit to tell some borrowers they owed more than they actually did.

After having been in litigation for more than five years, Navient has agreed to cancel student debt for some borrowers and has officially closed up shop on its student loan arm. 

Who Qualifies for Navient Student Loan Forgiveness and Restitution?

Because Navient services a mix of federal and private student loans, your specific loan may not qualify for forgiveness. In this case, it only affects borrowers with private student loans that originated by Sallie Mae between the years 2002 and 2010 and where the loans were defaulted and charged off.  The settlement will cancel all remaining balances (about $1.7 billion) for students who attended for-profit colleges that had low graduation rates. 

Borrowers with federal student loans will not have their debt forgiven as part of this settlement.

However, many Navient borrowers with federal student loans may be entitled to restitution. As part of the settlement, Navient must pay $95 million in restitution that will impact about 350,000 borrowers. To be eligible for one of the modest restitution payments (about $260 per person), borrowers must meet the following criteria:

  • You must have entered repayment on an FFEL-program or Direct federal student loan program before January 2015
  • You must reside in one of the impacted states: AZ, CA, CO, CT, DC, DE, FL, GA, HI, IA, IL, IN, KY, LA, MA, MD, ME, MN, MO, NC, NE, NJ, NM, NV, NY, OH, OR, PA, TN, VA, WA, or WI.
  • You must have at least one federal student loan that was eligible for income-driven repayment between October 2009 and January 2017 but was instead put into forbearance as a direct result of a call with Navient customer service.
  • You must not have been in an income-driven repayment play prior to forbearance.
  • The period of forbearance must have lasted at least two consecutive years and at least half of forbearance must have had payments postponed instead of a retroactive forbearance to bring the account current.

There’s nothing you need to do to receive restitution payments if you qualify. You will receive a notification in the mail sometime this spring. In the meantime, make sure your mailing address is up-to-date to ensure you receive your notification.

How to Know if You’re Affected by the Settlement

More good news: if your student loan has been cancelled, you do not need to take any type of action on your part. The debt will be wiped away automatically and you can keep moving forward.

If your Navient student loans will be forgiven, you will receive a notification from Navient by or before July 2022. In the meantime, you should continue paying your student loans to avoid falling behind on payments and accruing interest. If your student loans do qualify for forgiveness, you will receive a refund for any payments made toward your loan after June 30, 2021. 

If you think you might qualify, take a few minutes to make sure your mailing address is up to date.

Will There Be More Study Debt Forgiveness to Follow?

Student loan forgiveness has been a hot topic over the past couple of years. Pausing payments on student loans due to the pandemic was a step in the right direction, but many are holding out for complete absolution. The pause has been extended five times already, but no other steps have been taken to get rid of student debt completely.

That said, there are still steps you can take on your own to have your student loans forgiven, cancelled, or discharged. Special circumstances apply, such as a permanent disability, to wipe out your debt entirely, but some work will be required on your part to take advantage of these programs.

What to Do Next

If you qualify for Navient student loan forgiveness, consider yourself among the lucky few. There’s nothing further to do on your part, as a settlement team is working behind the scenes to make everything official. In the meantime, keep an eye on your mailbox to receive your official notification that all is forgiven.

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