Navient's Controversy in Puerto Rico: What Led to the Lawsuit?

• Puerto Rico sued Navient Corporation in August 2023 for issuing risky, subprime interest loans to borrowers who were unlikely to repay them.

• Navient agreed to a $7.7 million settlement to forgive private student loans for Puerto Rican borrowers.

• Refinancing or income-driven repayment plans may help manage the remaining debt for borrowers not covered by the settlement.

Puerto Ricans who were preyed on by Navient will get a bit of relief under a new settlement. This is due to the lawsuit that started in August 2023 and was settled a year later. The lawsuit claimed that Navient handed out risky, high-interest loans to borrowers who were unlikely to repay them.

On top of that, Navient was also accused of not properly explaining loan terms and steering borrowers into forbearance instead of offering better options like income-driven repayment plans (IDR) or plans offered by the U.S. Department of Education, leaving many in even greater financial hardship.

As a result, in September 2024, Navient agreed to a $7.7 million settlement.

If you’re a student loan borrower in Puerto Rico, you’ve likely experienced the stress of managing these loans. But this settlement provides a much-needed opportunity for relief.

Let’s walk you through what this Navient lawsuit settlement in Puerto Rico means for you and how you can take the next steps to manage your loans and regain peace of mind.

Related

• Navient Student Loan Forgiveness – How it Works

• How to Get Rid of Navient Private Student Loans

• Biden Student Loan Forgiveness

As part of the settlement, Navient, formerly called Sallie Mae, agreed to forgive private student loans for borrowers in Puerto Rico. Here’s a simple breakdown of what this loan forgiveness entails:

• Private Loan Forgiveness: This settlement targets private education loans. That means federal student loan borrowers will not get any debt relief through this settlement.

• No Admission of Guilt: While Navient forgives these loans, the company has not admitted any wrongdoing as part of the settlement.

• Why It Happened: The lawsuit was filed by the Commonwealth of Puerto Rico’s attorney general, citing harmful lending practices that made it difficult for borrowers to repay their loans, leading to processing errors and financial distress.

The lawsuit against Navient Corporation was the result of a long legal battle that included enforcement actions by regulatory bodies:

• Initial Complaints: In August 2023, Puerto Rico’s attorney general accused Navient of issuing high-interest loans without fully explaining the terms, making loan payments more difficult for borrowers.

• Consumer Protection Issues: The lawsuit argued that Navient’s practices disproportionately harmed vulnerable populations in Puerto Rico, contributing to credit reporting issues, damaged credit scores, and financial instability, often resulting in late fees.

• Previous Settlements: This case isn’t isolated—Navient has faced similar lawsuits, including a $120 million settlement with the CFPB and state attorneys general in September 2024.

To qualify for student loan forgiveness, borrowers must meet specific criteria. Here’s who is likely eligible:

• Puerto Rican Residents Only: This settlement applies only to borrowers living in Puerto Rico who hold private student loans serviced by Navient.

• Private Loans, Not Federal: The settlement covers private student loans, which are not subject to the same regulations and protections as federal loans. Related: How Do I Know if My Student Loans are Federal?

• Hardship Priority: Borrowers who experienced financial hardship or were misled by Navient’s practices are expected to be prioritized for forgiveness.

Borrowers should check their loan status with Navient and look out for updates from local authorities to see if they qualify for this relief.

Puerto Rican borrowers can look forward to getting some help through Navient’s settlement, which will forgive around $7.7 million in private student loans. How much debt is forgiven for each borrower will depend on how much they owe and if they qualify based on the settlement’s rules.

For those who have struggled with high-interest loans or confusing loan terms, this settlement offers the chance to reduce or even wipe out their debt. This could make a big difference for many borrowers carrying the burden of these loans.

Moreover, those with past payment processing issues may see those errors corrected as part of this settlement.

Important: The details on how forgiveness will be implemented are still pending. It’s unclear whether loan forgiveness will happen automatically or if borrowers will need to take action.

The settlement was finalized in September 2024, but it may take several months for loan forgiveness to take effect. Stay alert for updates from Navient or Puerto Rico’s Department of Justice to know when the forgiveness will be processed.

In the meantime, borrowers can prepare by staying informed and planning their next steps. Here’s what you should do once the settlement is implemented:

1. Confirm Your Loan Is Forgiven: Check with Navient or the Department of Justice to ensure your loan balance reflects the forgiveness. Make sure no further payments are needed.

2. Consider Refinancing: If only part of your loan is forgiven or if you have other loans, consider refinancing or applying for a cosigner release to lower your interest rates or simplify your payments. Related: How to Refinance Your Student Loans

3. Explore Repayment Plans: If your loan isn’t fully forgiven, look into income-driven repayment programs or options offered by direct loan services that can lower your monthly payments.

1. Contact Navient for Help: If you think you were affected by the student loan servicer Navient’s bad practices but didn’t qualify for the settlement, reach out to Navient. Ask them if they can help you find better loan repayment options or assistance programs.

2. File a Complaint: If you feel like you were treated unfairly by Navient and didn’t get the help you need, you can file a complaint with Puerto Rico’s regulators or the CFPB. They may be able to help with your situation.

3. Check for Other Loan Forgiveness Programs: If you work in public service, you may be eligible for Public Service Loan Forgiveness (PSLF), which can forgive federal student loans after a certain number of payments.

Even though Navient no longer handles federal student loan servicing, recent changes under the Biden administration may affect your eligibility, and your current loan servicer can help you check if you qualify.

If you think you’ve been offered a predatory loan or need help managing your student loans, there are resources available to support you:

• Puerto Rico’s Department of Justice: You can contact Puerto Rico’s Department of Justice if you think you’ve been treated unfairly by a lender. They can investigate your case and provide legal support.

• Consumer Financial Protection Bureau: The CFPB helps protect student loan borrowers like you from predatory lenders. You can file a complaint with them if you feel a lender has misled you or treated you unfairly.

• Financial Counseling Services: Many organizations offer free or low-cost financial counseling. These services can help you understand your loan options, avoid bad practices, and create a repayment plan that works for you. Look for trusted resources online or ask your community for recommendations.

Knowing how to spot predatory student loan lenders is important so you don’t fall victim to their bad practices.

Our guide, “Are Student Loans Predatory? Understanding the Risks,” outlines the warning signs and how to protect yourself.

Navient Solutions, LLC issued risky loans and misled Puerto Rican borrowers by not explaining loan terms clearly and pushing them into forbearance instead of better repayment options. These practices led to a $7.7 million settlement to help those affected.

If you took out private student loans with Navient and were misled or given loans that were hard to repay, you may qualify for loan forgiveness.

Have questions about eligibility or other ways to reduce student loan debt? Book a 1-on-1 call with our expert student loan lawyers today. Let us guide you through your options and help you find the best path to financial relief.