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What does Navient's settlement mean for student loan borrowers in Colorado?

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Attorney General Phil Weiser’s office
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KGNU
Colorado AG Phil Weiser was one of a bipartisan coalition of 39 attorneys general that investigated the predatory lending practices of Navient. Nearly 7,000 Coloradans pushed into onerous student loan repayment terms can expect checks in the mail as soon as this week as part of a settlement agreement.

Nearly 7,000 Coloradans pushed into onerous student loan repayment terms can expect checks in the mail as soon as this week as part of a settlement agreement. Navient, one of the country’s largest student loan servicers, has been ordered to provide $1.85 billion in relief to borrowers nationwide.

The settlement results from legal action brought by 39 state Attorneys General over allegations of predatory lending practices by the company. As part of the settlement agreement, Navient will forgive around $35 million of student loan debt of more than 1300 Coloradans and send out restitution payments to around 7000 more. For KGNU and Rocky Mountain Community Radio, Shannon Young got the details from Colorado State Attorney General Phil Weiser.

SY: First, let's get all the listeners up to speed on this case, what's the backstory and how did we get to this point?

PW: Navient is a firm that services student loan debt, which means if you're a student and you take out debt to finance education, there's a decent chance Navient is the one managing the debt. And Navient had a responsibility to act lawfully and fairly, instead, they deceived people and engaged in predatory action, often encouraging and pushing people into plans, often called forbearance, that accrued additional interest, left students worse off while telling people that it was the better choice. So a lot of students and here in Colorado, these are the 7000 checks were hurt by Navient's conduct. We took them on, and we're bringing back relief.

SY: So get more into detail about what exactly was unfair, deceptive and predatory about Navient practices.

PW: Let's imagine you're a borrower for your student debt, and you call up Navient and you say, “I'm interested in my loan plan options, because I'm wondering, are there some other ways I can manage the debt that may leave my debt load burden less?” And they say, “Oh, yes, we have a recommendation for you. The best thing you should do is go into forbearance and you should essentially not pay any debt. And you're going to be better off.”

When you say that to someone and you don't say what is the true consequence, “by the way, you'll keep racking up more and more interest on your student loan,” you're misleading them. What basically is worth knowing is they were putting people in loans that hurt people. (They were) acting really without regard for the consequences to the borrowers and their families, ensnaring people in this trap of debt, all the while misrepresenting what would happen.

Let me give you another second problem that also happened. They would issue subprime loans, high interest loans, to students who are attending for-profit colleges and colleges that couldn't get other loans, because they knew the students wouldn't actually be able to pay back the loans.

That's another problem. When you say to somebody, “oh, I'm going to give you a loan for this education. And I know that you're not going to be able to pay it back. But I'm just going to have this saddled around your neck.”

Those sorts of borrowing practices, those sorts of lending practices hurt people. And that's why we took action here.

SY: One important piece of context in this discussion is the Public Service Loan Forgiveness Program. Can you describe what that is for listeners who may be unfamiliar with it?

PW: The federal government has made a promise to public servants, think firefighters, police officers, teachers who go to college, have debt. The promise is “spend 10 years in the public sector and we will forgive your student loan debt.”

In order to qualify you have to have that 10 qualifying years. Unfortunately, Navient ended up making decisions that made it harder for people to have the qualifying periods, putting people into non-qualifying repayment periods when they shouldn't have.

In this important settlement with Navient, we got people an opportunity to effectively go back and get those time periods restored towards qualifying time periods. So if you are interested in this Public Service Loan Forgiveness opportunity, and Navient is your student loan servicer, you need to pay attention. You may be able to get your public service loan forgiveness sooner than otherwise.

SY: In the case of Colorado, why are some loans being forgiven outright, and other borrowers are receiving these $260 restitution checks?

PW: The nature of this settlement was we had to basically put people into two categories. In one category were some of the most extreme cases where people were treated in what we saw as a pretty egregious manner. And we were able to push for the type of, let's call it larger scale loan forgiveness or debt cancellation.

In other cases, which were more, call it relatively not as egregious, we were able to get this $260 back to everybody. I recognize that for a lot of people, the damage done to them by Navient may not be fully repaired by the settlement, but this is going to go a long way to giving people something back. In some cases a very meaningful settlement back and for other people a chance to get their Public Service Loan Repayment Program quicker than they otherwise would, because they can effectively fix the mistake that Navient made.

SY: In general, are there any red flags that prospective student loan borrowers should be on the lookout for and seeking out loans to attend schools?

PW: One of the major headlines here, and this is not a new story, if you take out debt to finance your education, it's important that you be aware of the consequences of that debt, that you have your eyes open, and that you recognize that those who may be giving you that debt don't have your best interest at heart. And in this case, those servicing that debt may not have your best interest. That's why we have a student loan ombudsperson at the Attorney General's office to be a champion for student borrowers. Please go to our website for more information about our student ombudsperson so you can get educated and protect yourself.

SY: And finally, aside from the consequences, for example, like what the settlement represents, what are the chances of having more meaningful regulation when it comes to this industry in general?

PW: Our office has been a leader in fighting for students and fighting against predatory practices, either by debt servicers, lenders where appropriate, and also for-profit colleges who've taken advantage of students.

We've been pushing for fair treatment, including something called the Borrower Defense Rule, which means if you were deceived, misled into taking on debt like those for-profit colleges I mentioned earlier, that debt shouldn't be on you to pay back when you can't get the job you were promised, it should be on the institution who pushed you into that debt.

So we're pushing for these sorts of reforms. There's now attention to this issue at the Department of Education, and we're going to keep fighting for students.

This story from KGNU was shared with Aspen Public Radio via Rocky Mountain Community Radio, a network of public media stations in Colorado, Wyoming, Utah and New Mexico, including Aspen Public Radio.

Shannon Young is the News Director at KGNU in Boulder/Denver. She has worked in Mexico as a foreign correspondent and regularly contributed to PRX’s “The World”, Public Radio International, the Canadian Broadcasting Corporation (CBC), The Guardian, Vice News, Truthout, and the Texas Observer.