Eligible for money through California’s recent student loan settlement? What to know
One of the nation’s largest student loan providers will slash over $1.7 billion in debt from borrowers nationwide in a settlement forged between the company and dozens of states’ attorneys general last month. Tens of thousands of Californians will see some of that money.
California and 38 other states’ attorneys general sued student loan servicer Navient over allegedly leading borrowers into costly, long-term repayment plans — forbearances — instead of counseling them about income-driven ones. The attorneys general also contested that Navient, which was part of Sallie Mae until 2014, pushed subprime private loans on students at for-profit schools with low graduation rates while knowing that many borrowers would not be able to pay off debt.
Navient denied the lawsuit’s allegations, with its chief legal officer saying that the company’s decision to settle allowed it to “avoid the additional burden, expense, time and distraction to prevail in court.”
In total, Navient will give $95 million to federal borrowers and cancel $1.7 billion in private student loan debt across the United States. $11.5 million of the direct restitution and about $261 million of debt cancellation will go to California borrowers.
About 357,000 federal borrowers with certain types of long-term forbearances — 43,000 of whom are Californians — will get $260 in restitution. About 66,000 borrowers — more than 7,400 of whom are Californians — will have their private loan debt wiped out.
Here is what attorneys’ general offices wrote about relief eligibility:
Am I eligible for restitution?
People who are eligible for a restitution check must have resided in one of the following places as of January 2017: Arizona, California, Colorado, Connecticut, D.C., Delaware, Florida, Georgia, Hawaii, Iowa, Illinois, Indiana, Kentucky, Louisiana, Massachusetts, Maryland, Maine, Minnesota, Missouri, Mississippi, North Carolina, Nebraska, New Jersey, New Mexico, Nevada, New York, Ohio, Oregon, Pennsylvania, Tennessee, Virginia, Washington or Wisconsin, or be associated with a military address postal code.
You should be eligible if you entered repayment on a Direct or Federal Family Education Loan (FFEL) Program loan before January 2015, had at least one loan that was eligible for income-driven repayment, two years of consecutive forbearance between October 2009 and January 2017 (with some conditions) and did not enroll in income-driven repayment before that forbearance period.
To find out if your student loans are through Navient, check “My Loan Servicers” on your studentaid.gov account. Or call the Federal Student Aid Information Center at 800-433-3243.
Am I eligible for debt cancellation?
Your on-file mailing address as of June 30, 2021, must be within one of the states in the above paragraph or Arkansas, Kansas, Michigan, Rhode Island, South Carolina, Vermont, West Virginia, or be associated with a military address postal code.
Certain borrowers who took out private student loans meant for people with low credit scores, called subprime loans, through Sallie Mae between 2002 and 2014 and who had more than seven consecutive months of failed payments before June 30 should see relief. Cancellation also applies to some non-subprime private loans made in the same time period to attend specific for-profit schools listed here.
Look at your most recent communication from the company that sends bills for private student loan payments or check your credit report to determine who your provider is.
Some borrowers may be eligible for both restitution and debt cancellation.
How do I get debt restitution or cancellation?
If you are eligible for debt cancellation, you will receive a written notice from Navient before July 2022 saying that your debt has been canceled and your credit bureau will be alerted to remove the loan’s information. You will receive refunds of any payments made after June 30, 2021. You do not need to take further action.
If you are eligible for a restitution payment, you will receive a postcard in the mail from the attorneys’ general settlement administrator in spring 2022. Checks should be sent by mail in mid-2022, according to the attorneys general settlement’s webpage. You do not need to take any action to receive money, just ensure that your contact information and address are correct at studentaid.gov, or create an account there if you do not have one.
A representative for Navient confirmed information in this section, but did not have further updates at this time.
Learn more and follow updates at NavientAGSettlement.com.
This story was originally published February 16, 2022 at 5:00 AM with the headline "Eligible for money through California’s recent student loan settlement? What to know."
