There is a path to relief for private student loan borrowers who were defrauded by their schools.
For all the hoopla about federal student loan forgiveness, there has been little relief for students with private student loans, though one little-known program led by private student loan lender Navient is forgiving private loans for borrowers who seek relief because their schools lied.
of Project on Predatory Student Loans PPSL has launched a campaign to raise awareness of the servicer’s “School Misconduct Forgiveness Application,” which PPSL says gives borrowers who have experienced misconduct at school the right to apply directly for private loan forgiveness, marking long-overdue recognition of borrowers’ rights.
In January 2022, Navient reached a settlement with 39 state attorneys general over its lending practices for several for-profit schools, wiping out $1.7 billion in affected private loans. However, the move only affected borrowers who had already defaulted. Navient began sending forgiveness applications to borrowers who had complained about their loans but had not yet defaulted.
For nearly a decade, beginning in 2000, Navient, then known as Sallie Mae, made predatory loans to fraudulent for-profit colleges in exchange for stable borrowers. Many of these loans remain in Navient’s portfolio. These loans are subject to cancellation due to fraudulent conduct and under the Federal Trade Commission’s Holder-In-Due-Course Rule, which allows borrowers to assert the same claims and defenses against loan providers that they can assert against the original seller of a product or service.
“Today, we are working in unison to clarify a path to forgiveness available to private student loan borrowers who were deceived by their schools,” said PPSL Executive Director Eileen Connor. “Private student loans have always come with basic consumer protections like borrower protections, but lenders and servicers have thwarted borrowers’ efforts to realize them, both individually and at scale.”
“This application to Navient is an opportunity for borrowers who experienced fraud to finally seek relief on their personal loans and is a direct result of the persistence of our customers,” Connor continued. “We are getting the word out to ensure impacted borrowers — not just those handpicked by Navient — know there is a path to relief.”
Private student loan borrowers are not eligible for federal loan relief. Refinancing to a lower interest rate can help reduce your monthly payment. Visit Credible to speak with an expert and get your questions answered.
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Lawmakers want automatic loan forgiveness
Navient has set aside $35 million for liability purposes to cancel these predatory legacy loans. Member of Parliament Republicans, led by Sen. Elizabeth Warren, a Democrat from Massachusetts, worry that the application process for debt forgiveness is too difficult and that borrowers who would otherwise qualify could be left out.
While the PPSL campaign was designed to raise awareness of the program, Navient’s 12-page application is complicated, and lawmakers want the company to automatically provide relief to borrowers using information it already has about whether borrowers attended schools that qualify for relief. Lawmakers want the relief to be in place before Navient transfers its portfolio of 2.7 million student loans to the Missouri Higher Education Loan Authority (MOHELA) at the end of 2024.
“Navient should stop making borrowers apply for relief and automatically forgive student loan payments using the information the company already has about whether borrowers attended schools eligible for relief,” the senators said. “Given that MOHELA has not followed guidance on forgiveness of predatory federal loans, it is difficult to imagine that it would do any better with respect to the forgiveness of the similar private loans that Navient transfers to them.”
If you’re having trouble paying back your private student loans, you won’t be able to benefit from federal relief. To reduce your monthly payments, consider refinancing your loans to a lower interest rate. Visit Credible to get a personalized interest rate in minutes without impacting your credit score.
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Federal student loan cancellations hit record high
The Department of Education has canceled $28.7 billion in federal student loans for more than 1.6 million borrowers who were defrauded by their schools, whose schools suddenly closed, or who were compensated through related court settlements.
Besides this, President Joe Biden has about $167 billion in student loans 4.75 million Americans were granted forgiveness, primarily through changes to income-contingent repayment plans.
Biden also proposed a new federal student loan forgiveness plan, a follow-up to an earlier plan blocked by the Supreme Court in June. The plan would forgive up to $20,000 in debt for millions of borrowers whose balances have grown due to unpaid interest. Borrowers who qualify for loan forgiveness through SAVE, School Closing Forgiveness or other forgiveness programs would automatically have their debt forgiven, even if they don’t enroll in the program.
Additionally, student loan payments would be forgiven for borrowers who have more than 20 years of repayment time. The plan also provides relief to borrowers who are having difficulty paying back their loans.
If you’re struggling to make payments on private student loans, you won’t be able to benefit from federal relief. However, you could consider refinancing your loans to a lower interest rate to reduce your monthly payments. Visit Credible to get a personalized interest rate in minutes without impacting your credit score.
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