Acting AG Bruck: New Jersey Student Loan Borrowers to Receive More than $60 Million in Relief from Settlement with Navient Corp. in State’s Lawsuit Alleging Deceptive, Misleading Tactics by the Student Loan Servicer

Settlement Is Part of $1.85 Billion Nationwide Resolution

For Immediate Release: January 13, 2022

Office of The Attorney General
– Andrew J. Bruck, Acting Attorney General
Division of Consumer Affairs
– Sean P. Neafsey, Acting Director
Division of Law
– Michelle Miller, Director

For Further Information:

Media Inquiries-
Lisa Coryell

Consent Judgment

Newark – Acting Attorney General Andrew J. Bruck and the Division of Consumer Affairs today announced that New Jersey student loan borrowers will receive over $60 million in relief from a settlement with Navient Corp. and its subsidiary Navient Solutions LLC (Navient) that resolves a 2020 lawsuit filed by the State against the student loan servicing giant. The State’s lawsuit alleged that Navient engaged in unconscionable commercial practices, deceptive conduct, and misrepresentations when servicing thousands of New Jersey consumers’ student loans over the past decade – boosting company profits at the expense of struggling borrowers.

The Navient settlement includes approximately $57.2 million in debt relief and $3.1 million in restitution payments to New Jersey borrowers, as well as a $3 million payment to the State.

New Jersey’s settlement is part of a nationwide settlement of claims by 38 States and the District of Columbia alleging widespread abuses in Navient’s student loan origination and servicing business. The total value of the nationwide settlement is approximately $1.85 billion.

Navient, formerly known as Sallie Mae, was one of the nation’s largest servicers of both federal and private student loans, until partially exiting the business in September 2021. Student loan servicers are a critical link between borrowers and lenders. In addition to managing borrowers’ accounts and processing their monthly payments, student loan servicers are responsible for assisting financially struggling borrowers to enroll in alternative repayment plans or request a modification of loan terms from lenders.

“Too many New Jerseyans have struggled to pay off their student loans,” said Acting Attorney General Bruck. “And too many of those borrowers have had a harder time because their student loan servicer put corporate profits above their best interests. With today’s settlement, we are holding one of the country’s largest student loan servicers accountable, and we are putting millions of dollars back in our residents’ pockets.”

From 1989 to 2016, the average cost of obtaining a degree from a four-year college or university in the United States rose about eight times as fast as the average wage. Faced with the soaring cost of higher education, over 44 million people in the United States have taken out student loans. Total student loan debt is now more than $1.75 trillion nationwide, and the average New Jersey borrower carries $35,730 in student debt, among the highest in the country, according to some sources.

Statistics show that certain groups of borrowers are particularly at risk.

In 2019, the New York Federal Reserve found that borrowers in Black-majority zip codes are more likely to borrow to fund their education, have higher average loan balances, and fall into default at almost double the rate of white-majority zip code borrowers. Moreover, the findings show that borrowers who received Pell Grants—most of whom have family incomes below $40,000—were five times as likely to default within 12 years; borrowers whose parents did not attend college were more than twice as likely to default than borrowers whose parents did attend college; and borrowers who began their education at for-profit colleges defaulted at seven times the rate of those who attended public colleges.

“Student loan borrowers who thought college would be a path to success instead found themselves on the road to financial ruin as a result of Navient’s unlawful conduct,” said Sean P. Neafsey, Acting Director of the Division of Consumer Affairs. “Navient’s failure to provide fair and honest services to New Jersey borrowers violated consumer protection laws and heaped more debt on individuals who could least afford it. The settlement announced today holds Navient accountable for its unconscionable conduct, and provides meaningful financial relief to the borrowers harmed by it.”

In its civil suit against Navient, the State alleged that instead of fulfilling its legal obligation to student loan borrowers Navient put its own financial self-interests first through deceptive and unconscionable tactics that at various times over the last decade have included:

  • Steering borrowers into forbearance instead of income-driven repayment plans better suited to their financial circumstances. Instead of taking the time (and incurring the operational expense) to assist borrowers experiencing long-term financial hardship choose the most appropriate loan repayment option for them, such as those setting monthly payments based on what they could afford to pay, Navient’s call center representatives steered borrowers toward forbearance—usually a costlier option for such borrowers than income-driven repayment plans. Navient incentivized its call center representatives to adopt this approach because it allowed representatives to handle calls more quickly, at less cost to the company. As a result, borrowers steered into forbearance suffered consequences including the unnecessary accrual of interest, the addition of interest to the principal, and the loss of months of timely payments that would have otherwise counted toward loan forgiveness.
  • Failing to inform borrowers of deadlines to recertify their eligibility for certain income-driven repayment plans. Borrowers in income-driven repayment plans typically must recertify their eligibility on an annual basis. Navient failed to clearly communicate to borrowers the deadline to recertify their eligibility and the consequences of non-renewal. As a result, many student loan borrowers’ repayment plans expired unnecessarily, resulting in immediate increases in their monthly payments and other financial harm.
  • Enticing borrowers to take out private student loans with a cosigner, and then making it exceedingly difficult to obtain a cosigner release. For loans originated by Navient, the company deceptively encouraged borrowers to have family members or others guarantee their loans as cosigners, which increased Navient’s chances of being repaid if the student defaulted. Navient then set various hurdles to make it difficult for borrowers to meet the company’s requirements for releasing a cosigner from a loan, which benefited Navient by maintaining additional sources of payment if a borrower failed to pay.
  • Misleading borrowers about the amount of their delinquency. Navient employees were trained to attempt to collect more than the past due amount from borrowers behind on their loans by using language that misled borrowers about how much they owed. Specifically, Navient sought to collect not only the delinquent amount, but also the next month’s payment by misleadingly calling the amount sought the “Present Amount Due.” This practice resulted in borrowers paying hundreds of dollars a month more than a borrower may have budgeted for the payment.

Under the terms of the settlement, Navient will make a total of $95 million in restitution payments of about $260 each to approximately 350,000 harmed consumers in the 39 jurisdictions, and it will cancel more than $1.7 billion in subprime private student loans owed by approximately 66,000 borrowers nationwide.

Borrowers who will receive restitution or forgiveness span all generations: Navient’s harmful conduct impacted everyone from students who enrolled in colleges and universities immediately after high school to mid-career students who dropped out after enrolling in a for-profit school in the early 2000s. Parents or grandparents who co-signed their children or grandchildren’s subprime loans will also receive relief.

Approximately 2,040 New Jersey borrowers will receive a total of $57,234,256 in debt cancellation and another 11,522 New Jersey borrowers will receive a total of $3,071,421 in restitution payments. 

The settlement also requires Navient to notify borrowers of the Department of Education’s important changes to the Public Service Loan Forgiveness (PSLF) program, which offers millions of qualifying public servants a waiver that may count past payments towards loan forgiveness. The Attorney General encourages all New Jersey residents who work in the government or non-profit sectors to review the PSLF website to determine whether they might qualify for loan forgiveness.

On October 20, 2021, Navient’s contract to service 5.6 million loans owned by the U.S. Department of Education was transferred to Maximus/AidVantage. Following completion of this transfer, Navient will continue to service its existing portfolio of private student loans and legacy Federal Family Education Loan (FFEL) program loans issued before the FFEL program ended in 2010.

Acting Attorney General Bruck filed the settlement as a proposed Consent Judgment today in  Superior Court in Essex County. The settlement will require court approval.

Consumers do not need to take any action to receive the benefits required under the settlement. Consumers receiving private loan debt cancellation will receive a notice from Navient, and they will receive refunds of any payments made after June 30, 2021. Consumers who are eligible for a restitution payment will automatically receive a restitution check of approximately $260 from the Attorney General’s settlement administrator in mid-2022.

To ensure the settlement administrator can find you, federal loan borrowers who may be eligible for a restitution payment are encouraged to update their contact information in their account or create an account if they do not already have one. For additional information, please visit the settlement website at

Deputy Attorneys General Ana Atta-Alla, Cathleen O’Donnell, Isabella Pitt, Christina Garfield, Peter Van Brunt, and Alex Schmidt of the Division of Law’s Affirmative Civil Enforcement Practice Group, represented the State in the matter. They were supervised by Consumer Fraud Prosecution Section Chief Patricia Schiripo and Assistant Attorneys General Janine Matton and Brian McDonough. Investigators Michelle Davis, Walter Kaminski, and Jared O’Cone conducted the investigation on behalf of the Division of Consumer Affairs and the State of New Jersey.



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