There's a Program to Cancel Some Private US Student Loans. Most Don't Know About It.

The New York Times reports on a program to forgive U.S. student loans from private lenders - a kind of private parallel to a federal program which "allows those who were seriously misled by their schools to have their federal student loans eliminated." The problem? Eight U.S. senators complain the loan discharge process remains "burdensome and confusing" - and most students don't even know it exists.Navient, a large owner of private student loan debt, has created, but not publicized, a program that allows borrowers to apply to have their loans forgiven.... A nonprofit group of lawyers has stepped in ease the process: On Thursday, the Project on Predatory Student Lending, an advocacy group in Boston, published Navient's application form and an instruction guide for borrowers with private loans who are seeking relief on the grounds that their school lied to them... For nearly a decade, in the early 2000s, Navient - then known as Sallie Mae - struck deals with for-profit schools to issue private loans to their students. Lawsuits from state attorneys general later accused Navient of making those loans knowing that most would never be repaid. Many schools indemnified Navient for the private loans, agreeing to defray the company's loss if the loans defaulted. In 2022, Navient settled with 40 state attorneys general and canceled $1.7 billion in debt on those private loans - but only for borrowers who had already defaulted. Because those debts were unlikely to ever be repaid, the deal cost Navient only $50 million, the company said in regulatory filings. Borrowers who had kept paying their bills... remained stuck. But a pressure campaign from lawmakers, federal regulators and lawyers representing borrowers prompted the company to create the "school misconduct discharge." Navient began sending a 12-page application form this year to some borrowers who complained about their private loans. The document lists dozens of types of impropriety by schools - such as inflating job placement rates and graduates' earnings, or misrepresenting their educational programs - and asks borrowers to choose which apply to their experience. Applicants are required to submit documentation for their claims... [Navient's CEO, David Yowan] told investors on a conference call in January that Navient had put $35 million in reserve for losses on school misconduct claims. He cited "new regulatory expectations" as the reason. Navient has not disclosed how much of its $16.6 billion private student loan portfolio consists of loans that could be eligible for the debt cancellation program.

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