Experts are sounding the alarm about a little-known program that could offer forgiveness to certain borrowers with private student debt.
More than a million borrowers defrauded by schools have had billions of dollars in federal student debt forgiven through a government program.
But Americans with private loans have generally been unable to get debt relief — even when they were victims of misconduct, such as schools inflating graduates’ earning potential or career growth.
Navient, a large private student loan servicer, has created a program that allows borrowers who have been defrauded by their schools to apply for loan forgiveness.
But a lack of publicity and a “cumbersome and confusing” application process are keeping Americans from accessing the aid. The New York Times reported.
Americans with private loans have generally been unable to get debt relief — even when they were victims of misconduct, such as schools inflating graduates’ earning potential or career growth
The Wilmington, Delaware-based administrator’s new program is called a “school misconduct dismissal.”
It’s a parallel of sorts to the federal “borrower defense to repayment” program, which allows those duped by for-profit schools to have their debts forgiven.
Under the Biden administration, this program has forgiven nearly $30 billion in federal debt for 1.6 million borrowers.
The legal nonprofit Project on Predatory Student Lending (PPSL) launched a campaign in late May to raise awareness of Navient’s program in an effort to help borrowers.
In a rackthe organization said that Navient “recently quietly began sending its new application to select borrowers.”
Boston-based PPSL published Navient’s application form and a manual for borrowers with private loans seeking debt forgiveness on the grounds that their school lied to them.
“We are spreading the word to ensure that affected borrowers – not just those Navient itself chooses – know that there is a path to relief,” Eileen Connor, president and executive director of PPSL, said in a statement.
The organization points to a 1976 Federal Trade Commission regulation as the basis for borrowers’ claims that their private loans should be forgiven.
The Preservation of Consumers’ Claims and Defenses or “Holder Rule” allows those who use certain types of loans to dispute the debt if they did not receive the goods or services they purchased as promised.
“Private student loans have always included basic consumer protections such as borrower defense, but lenders and servicers have stymied borrowers’ efforts to achieve these, individually or on a large scale,” Connor said.
For nearly a decade in the early 2000s, Navient – then known as Sallie Mae – entered into agreements with for-profit schools to provide private loans to their students. The New York Times reported.
Lawsuits later accused the servicer of making the loans knowing most would never be repaid.
In 2022, Navient settled with 40 attorneys general to forgive $1.7 billion in private loan debt – but only for borrowers who had already defaulted.
Those who had not defaulted on their loans had to continue making payments.
But a pressure campaign from lawmakers, advocates and regulators has prompted the company to create a “school misconduct dismissal” program, the outlet reported.
For nearly a decade in the early 2000s, Navient – then known as Sallie Mae – entered into agreements with for-profit schools to provide private loans to their students.
Navient, a large private student loan servicer, has created a program that allows borrowers who have been defrauded by their school to apply for loan forgiveness
One borrower whose loans have been forgiven under the program is Danielle Maynard, 34, who recently received notice that nearly $40,000 in private loans would be canceled for her studies at the New England Institute of Art in Brookline, Massachusetts.
She had been paying $700 a month to Navient for more than a decade for debt, which she took out to attend the now-closed school.
Maynard told The New York Times that she “cried a lot” when she found out the loans had been wiped out.
But others have complained on social media about problems accessing the application form.
Senator Elizabeth Warren, along with eight Senate colleagues, sent Navient a letter last month asking questions about the school misconduct dismissal program.
This included concerns about the “burdensome and confusing” 12-page application form that borrowers must submit to apply for private loan relief.
“Navient has admitted responsibility for canceling their predatory loans, but has created a cancellation process that is impossibly confusing for borrowers,” said Senator Warren.
“I will not let Navient get away with defrauding defrauded student loan borrowers into getting the relief they deserve.”
When asked about the program and the criticism, a Navient spokesperson told The New York Times, “Borrowers can contact us at any time, and our attorneys can help.”
In a letter to senators reviewed by the outlet, the company said it had made “some” loans to borrowers who meet Holder Rule criteria, and that it had “recently implemented an enhanced process for borrowers to request discharges.” , which described it as “still.” in an early stage.’
Senator Elizabeth Warren (pictured) and eight Senate colleagues sent Navient a letter last month asking questions about the school misconduct dismissal program
It comes as angry lawmakers and campaigners have called for the “sacking” of federal credit manager MOHELA, amid mounting reports of widespread failures.
Members of Congress, advocacy groups and student loan borrowers held a press conference in Washington DC last month to demand the federal government end its contract with the company.
They are calling for the Missouri Higher Education Loan Authority – also known as MOHELA – to be suspended for its mismanagement of millions of student loan accounts.
Borrowers have complained about nine-hour wait times to get help, delayed and lost paperwork and miscalculated payments, among other things.