Millions of Americans could potentially get their student debt canceled after Massachusetts Senator Elizabeth Warren called on Navient to cancel “decades-old predatory private student loans” under a Federal Trade Commission (FTC) protection law.
Navient said this year it would move its private and commercial loans in the Federal Family Education loan program to MOHELA, a major federal student loan servicer. That means 2.7 million borrowers will see their loans move to a new servicer, and some Democratic members of Congress are hoping that a significant chunk of those get wiped out.
That’s because the Department of Education (DOE) previously canceled federal student loans for borrowers under the FTC’s borrower defense to repayment rule, which allows borrowers to clear debt if they attended a specific list of schools deemed fraudulent by the DOE.
However, because Navient’s private loans weren’t covered under the law, many borrowers who attended the “fraudulent” schools never had their debt erased.
In a letter, Warren and eight other Democrats asked Navient to get rid of the student debt under the Holder Rule, which permits borrowers to cancel their debt if the university “fraudulently induced the student to enroll and had some relationship with the lender,” according to the Minnesota Attorney General’s Office.
Navient was found to have had relationships with several for-profit schools, and the servicer ended up reaching a settlement with 39 states for $1.7 billion due to accusations of working with for-profit schools to give students high default-rate loans.
