Navient, a student loan service giant, has just reached a 39-state settlement to forgive $ 1.7 billion in unpaid student loan debt. The deal comes amid allegations that the company was engaging in predatory lending practices that left borrowers in the lurch with the ability to repay.
For some 66,000 borrowers in most of the states across the country, the settlement indicates a welcome deferral of student loan debt that many Millennials have dug into a hole from which they may never be able to climb financially. But unfortunately, there are strict rules about who qualifies for the forgiveness program. Here’s what to know.
Who qualifies for forgiveness?
The agreement requires Navient cancel debt for 66,000 borrowers and totals about $ 1.7 billion. The company will also pay $ 95 million in restitution. The loans were mainly for teaching at profitable schools such as ITT Tech and DeVry University. These schools have notoriously low graduation rates and poor to non-existent job placement for graduate students.
The debt for forgiveness is overdue loans of 2002 and higher. People who have kept their payments up to date are not eligible for forgiveness.
To qualify, borrowers from either the District of Columbia or one of the 38 states involved in the lawsuit:: Arizona, Arkansas, California, Colorado, Connecticut, Delaware, District of Columbia, Florida, Georgia, Hawaii, Iowa, Illinois, Indiana, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Missouri, Nebraska, Nevada , New Jersey, New Mexico, New York, North Carolina, Ohio, Oregon, Pennsylvania, Rhode Island, South Carolina, Tennessee, Vermont, Virginia, Washington, West Virginia and Wisconsin.
Is more student loan debt forgiveness on the horizon?
President Biden has campaigned heavily on the promise of forgiveness of student loans, but his administration has not yet fulfilled its $ 10,000 cancellation promise for every borrower with federal student loan debt. Debt has been canceled for specific groups—borrowers with disabilities and those who qualify for it the PSLF program– but other student loan debt does not seem to be going anywhere anytime soon.
Asked how the administration planned to handle their hitherto unrealized campaign promise, Vice President Harris gave a cryptic non-response. “Well, I think we need to continue to do what we do and find out how we can creatively alleviate the pressure that students feel because of their student loan debt,” she said.
And with the moratorium on student loan payments ending in May, people across the country are hoping that the administration will come up with a creative solution that actually works and not just put a patch on the budget bleeding of student loan debt.
Why forgiveness of student loans is important
While a particular segment of the population claims that those seeking debt forgiveness are only seeking a handout, there is good fiscal evidence that the cancellation of crippling student debt will be a boon to the economy.
According to a recent analysis by The Roosevelt Institute, the moratorium on student loan payments has given the economy a significant boost. The brainstorming estimates that $ 173.83 billion would be added to U.S. GDP in just the first year of full student loan debt cancellation. Parents will have more liquid cash for necessities like childcare. Consumer spending will also increase, which means more tax revenue for state and local governments, possibly meaning more funds are available for infrastructure and education improvements.