Negotiating a student loan settlement with Navient is possible, but it's not guaranteed. You may be able to negotiate a settlement if your loans are in or near default and you have enough cash to pay the settlement amount in full or over a short period of time.
Below, I'll review the student loan settlement process with Navient.
Disclaimer: Although I am a student loan lawyer, this article contains general information and should not be taken as legal advice. If you want legal advice that pertains to your specific situation, you should schedule a free 10-minute consultation with me.
Navient Lawsuit Settlement Update
Navient settled a collection of lawsuits for $1.85 billion filed against it by a coalition of attorney generals.
The lawsuits allege that Navient steered borrowers into costly repayment plans and predatory student loans.
Almost all of that money will wipe out the private student loan debts for people who borrowed loans from Sallie Mae to attend ITT Technical Insitute and the Art Institute Schools.
Here are three things you need to know.
- Federal student loan borrowers. Navient will cut a $260 check to about 350 thousand federal student loan borrowers who it placed in long-term forbearances.
- Private student loan borrowers. Nearly 66 thousand people who borrowed private student loans for ITT Tech and the Art Institute Schools will have their loans wiped out. All told, Navient is writing off $1.7 billion in private student loans.
- No need to apply. You don’t need to do anything to get this relief. Borrowers eligible for loan forgiveness will get a notice from Navient by July of this year.
You can read more about the settlement details in the Washington Post.
Does Navient settle student loans?
Navient does settle private student loans, but not the federal loans it services. To settle federal student loans, you'll have to contact the loan holder, which, depending on whether the loan is an FFEL or Direct Loan, could be a guarantee agency or the Department of Education.
Find out if your loans are federal or private
Navient services federal and private loans. You can find the types of loans you have with Navient by logging into your account and viewing "Loan Details". You can also visit the Federal Student Aid website, studentaid.gov, to view federal student loans. If the Navient loan isn't listed, it's likely a private student loan.
Federal student loans Navient services:
- Stafford Subsidized and Unsubsidized Loans
- FFEL Parent PLUS Loans
- FFEL Consolidation Loans
Navient used to service loans made under the Direct Loan Program. In October 2021, Navient reached an agreement to transfer Department of Education loans to Aidvantage, a division of Maximus.
Private student loans Navient services or owns:
- Signature Student Loans
- Tuition Answer Loans
- Smart Option student loans
- College Ave refinance loans
What if my loans started with Sallie Mae but were sent to Navient? Before 2011, Sallie Mae was a student loan servicer and lender for FFEL Loans. When Congress ended the FFEL Program, Sallie Mae transferred those federal loans to Navient. Student loan borrowers with FFEL Loans are eligible for loan forgiveness programs offered by the U.S. Department of Education, including the Public Service Loan Forgiveness Program. To qualify for PSLF, public servants need to submit a Direct Consolidation Loan application to FedLoan Servicing for processing.
Does Navient offer settlements?
In the past, Navient has offered settlements to borrowers with private student loans that are severely delinquent, in default, or charged off. Navient doesn't settle loans in repayment, deferment, or forbearance, or an interest-rate only repayment plan. You can start the settlement process by contacting Navient's customer service representatives.
If Navient agrees to settle, the payment could be made by:
- Lump-sum - a single, large payment made within 30 days of reaching an agreement.
- Monthly payments - fixed amounts usually paid for no more than 60 months.
- Lump-sum and monthly payments - a smaller single payment made shortly after reaching the agreement followed by consecutive payments for no more than 60 months.
Typically, you'll get the best settlement offer if you have a lump sum amount available and the worst offer if you can only afford monthly payments. An agreement to make a smaller lump sum payment followed by monthly installments is a middle ground.
Note: Navient doesn't have to agree to settle or accept payments over 60 months. However, five years is the longest term I've ever seen Navient allow.
Consequences of defaulting on private loans
The consequences of private student loan default are:
- Harm to credit report. Late payments will be reported to the credit bureaus and stay on your credit report for seven years. Navient will not agree to delete the negative information as part of a settlement.
- Collection fees. Your promissory note may allow Navient to add collection fees to your balance. Unlike the federal government, which waives collection fees for defaulted student loans, Navient won't waive collection fees unless you negotiate a settlement.
- Lawsuit. Navient typically doesn't sue immediately after you default. It costs them money to hire a law firm. As a result, Navient usually waits until after debt collection agencies prove ineffective at collecting money from you before they send your loans to a law firm to file a student loan lawsuit against you.
How much will Navient student loan settlement save you?
There's no set amount or percentage that Navient will accept or has to accept to settle a private student loan. I've seen Navinet agree to settle for pennies on the dollar and for 60% of the current balance. The difference usually turns on the last payment date and the primary borrower's and cosigner's credit reports. The longer it's been since payment has been made and the poorer the credit reports look, the better the offer.
Sample Navient Settlement Offer Letter
Over the past several years, people have hired me to settle their private student loans with Navient. Once an agreement is reached, Navient will send a settlement letter that will include:
- Your name and mailing address
- Your account number
- The current balance of the loans being settled
- The settlement amount
- The settlement payment terms
- The loans included in the settlement
- Payment instructions
Here are a few settlement offer letters I've recently negotiated for clients:
- 50% settlement for a lump sum
- 38% settlement for a lump sum
- 29% settlement for a lump sum and monthly payments
- 54.5% settlement for monthly payments
And here's a case study showing how I helped Eddie get free from $68,897.80 in private higher education loans by negotiating a settlement with Navient.
Note: I'm providing these letters to you only as an example. Your situation is unique and can end differently.
How long does it take to negotiate a settlement?
Here's a typical settlement timeline:
- Month 1: You miss the first payment on your account. Navient representatives will contact you to help you keep your account in good standing.
- Months 2-7: You'll continue to miss payments, and Navient will start calling all numbers they have on file for you, including your cosigner, family members, and job. Towards the end, you'll get a letter notifying you that your account is being referred to Navient's legal network. If you get a settlement offer at this stage, it will likely be for around 70% of the current balance.
- Months 8+: Navient will send your loans to collections, which will either be an internal unit or a third-party collection agency like Allied Interstate or FAMS. You may receive a settlement offer for closer to 50% of the loan balance.
Will Navient sue you? Navient typically doesn't sue borrowers right after they default on private student loans. In my experience, the company usually waits until the statute of limitations is close to running out before they file a student loan lawsuit.
Watch out for Navient settlement phone calls
Navient recently settled a student loan forgiveness lawsuit with the American Federation of Teachers (AFT). The results of the settlement won't affect what borrowers owe or lead to their loans being canceled. However, scammers are targeting borrowers with phone calls promising debt forgiveness — for a fee.
Here's how the scam works. The scammer calls you and explains that your loans are eligible for partial or total forgiveness as part of the Navient class-action lawsuit settlement. Next, they explain the process to you and the fees necessary to process your forgiveness application. Finally, they'll ask for your debit or credit card information and begin making withdrawals according to the payment plan you agreed to.
Navient won't call you to offer loan forgiveness in exchange for you paying a fee.
Other Navient Lawsuits
- Consumer Financial Protection Bureau (CFPB) - the agency charged by the federal government with protecting consumers sued Navient, alleging its loan servicing practices steered borrowers toward forbearances instead of income-driven repayment plans and provided unclear information about how to re-enroll in IDR Plans and how to qualify for a cosigner release. The case is still pending after the court denied Navient's motion to dismiss.
- State AG Cases - Attorney Generals for California, Illinois, Mississippi, New Jersey, New York, Pennsylvania, and Washington State sued Navient. They made many of the same allegations as did the CFPB. Those cases are still pending. However, a state court judge in Washington ruled that Navient violated consumer protection laws.
How to settle student loan debt with Navient
You can attempt to settle student loans on your own or with the help of a more experienced negotiator like myself. If you want to negotiate a payoff with Navient by yourself, here are steps you can take.
Step 1 - Review your loans
Before starting the settlement process, check the number of loans you have, the loan balance for each loan, and the repayment status. This information will help you prepare to estimate your potential settlement amount and when settlement will become a possibility.
Step 2 - Check your personal finances
A settlement is going to make money. Check your bank accounts, savings, 401k, etc., to see how much you have available. You may also want to talk with your spouse, parents, etc., to see if they're willing to help you with a settlement.
You want to know:
- How much you'll have available in a lump sum within 30 days of receiving a settlement offer.
- How much you can afford to pay towards a settlement every month.
Most student loan settlements I negotiate for clients are for a lump sum. You usually get a better settlement offer the more money you can pay at one time. But sometimes, a lump sum isn't an option. So you want to know what's the most you can afford to pay towards a settlement each month.
One other option is to apply for a personal loan. You don't have to accept the loan. Just get pre-approved.
Step 3 - Talk with your cosigner
Defaulting on your student loans will hurt your credit and your cosigner's credit. So if you're not already in default, talk with your cosigner to discuss your options for dealing with the loans (e.g., student loan refinancing).
You could look into getting them released as a cosigner before you default. But the cosigner release process can take 1 to 2 years.
Note: While you can't sue the primary borrower for a cosigner release, a cosigner can sue a primary borrower to recover the money they've paid towards the loan.
Step 4 - Default on your loans
There's no way around it. You have to default before a settlement will be accepted. No private student loan lender, including Navient, is willing to take a settlement if the loan is in good standing.
Defaulting on your student loans will leave negative marks in your credit history. And those marks will affect your credit score.
But from what I've seen, it's easier to raise your credit score than it is to get rid of your student loan debt. So a reasonable settlement may be worth the damage.
Step 5 - Let Navient make the first offer
After you default, Navient will send your loans to a collection agency. The collection agency may be an internal unit at Navient. Or it may be an external unit outside of Navient.
Either way, when the debt collector calls, ask for your payment options.
They'll usually offer a settlement for a lump sum or a short payment plan (e.g., 24-36 months). You can either accept or counter the settlement. You don't need to counter in writing. You can do so during the phone call.
The debt collector will either accept or reject the offer during the call. They may even say they'll get back to you once they have a response.
Either way, wait until you get a written offer before you make payment.
Step 6 - Check the written settlement offer
When you get the agreement letter, check:
- your name and contact information
- your account number
- the loan number(s) and loan balance(s)
- the settlement terms (amount, payment date, etc.)
If anything is incorrect, let the representative know the issue and request an updated copy.
Step 7 - Pay the settlement
Navient allows you to pay directly by setting up an electronic funds transfer. You can also mail a check to the address they provide. And, depending on the debt collector, you may even be able to pay using a credit card.
Always keep a record of your payment.
What happens after you settle Navient student loans?
Roughly six weeks after you make the final settlement payment, Navient will send you a debt clearance letter. This letter serves as proof that you are no longer financially responsible for the particular student loan.
You'll also get a Cancellation of Debt notice (a 1099-C) from the IRS at the end of the year. A 1099-C represents the unpaid portion of your student loan as taxable income. You'll need to file this with your tax return and will likely need to pay income tax on that amount. However, the IRS does offer a process to avoid having to pay taxes on the canceled amount.
Navient student loan settlement questions
- Credit score: Late payments will be added to the credit reports for you and your cosigner if any. The negative information will cause your credit score to drop.
- Remove late payments: Navient won't agree to pay for deletion, whereby you pay the settlement, and Navient agrees to delete late payments. There are anecdotal reports of borrowers working with a credit repair professional to remove late payments or entire student loan accounts.
- Cosigner: The settlement will typically release your cosigner from liability.
- Federal and private loans with Navient: You can negotiate a payoff of your private student loans Navient services without jeopardizing your federal student loans. Also, you don't have to be in default with your federal loans to negotiate a settlement for your private loans.
Alternatives to Navient Student Loan Settlement
If you're unable to settle your student loan debt, consider these alternatives.
- Deferment or forbearance: Both deferment and forbearance allow you to pause your student loan payments temporarily. Interest will continue to grow during that time. But deferment and forbearance give you time to breathe so you can figure out your next steps.
- Income-driven repayment plan: Lowering the monthly payments on your federal student loans with an IDR plan could allow you to contribute more to your private student loans, which could allow you to escape that debt quicker.
- Refinancing: If you have a good credit score and enough income to cover your living expenses and credit card debt, refinancing may allow you to get a lower interest rate, a longer repayment term, and more flexible repayment options. Typically, you'll need a good credit score (680+) to get a lower interest rate.
- Bankruptcy: If you can't refinance and can't afford a settlement, filing student loan bankruptcy maybe your best option. By itself, neither a chapter 7 nor a chapter 13 bankruptcy case will discharge your student loan debt. You have to file an adversary proceeding for student loans.
Want expert help with a Navient student loan settlement?
In most cases, hiring a lawyer is the best option to ensure the best student loan settlement opportunity while protecting yourself.
I can help you decide if settling your student loans is the best option for you. Schedule a free 10-minute call with me today. We'll go over possible settlement options and any alternatives that fit your needs and goals.