There’s a Program to Cancel Private Student Debt. Most Don’t Know About It.

Danielle Maynard, who took both federal and private loans to attend the New England Institute of Art, in Springfield, Mass., on May 29, 2024.  (Simon Simard/The New York Times)
Danielle Maynard, who took both federal and private loans to attend the New England Institute of Art, in Springfield, Mass., on May 29, 2024. (Simon Simard/The New York Times)

More than 1 million borrowers who were defrauded by for-profit schools have had billions of dollars in federal student loans eliminated through a government aid program. But people with private loans have generally been excluded from any relief — until recently.

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. Some who succeeded have jubilantly shared their stories in chat groups and other forums.

“I cried, a lot,” said Danielle Maynard, who recently received notice from Navient that nearly $40,000 in private loans she owed for her studies at the New England Institute of Art in Brookline, Massachusetts, would be wiped out.

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Navient, based in Wilmington, Delaware, has not publicized the discharge program that helped Maynard. Other borrowers have complained on social media about difficulties getting an application form. When asked about the program and the criticisms, a company spokesperson said, “Borrowers may contact us at any time, and our advocates can assist.”

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.

“We want to level the playing field and let people know, instead of having it be this closely held secret,” said Eileen Connor, the group’s director.

Sen. Elizabeth Warren, D-Mass., and eight Senate colleagues sent Navient a letter last month with a lengthy list of questions about the program. Navient responded but did not directly address many of the senators’ questions.

Navient’s new program — which it calls a “school misconduct discharge” — is something of a private parallel to a federal program known as “borrower defense to repayment,” which allows those who were seriously misled by their schools to have their federal student loans eliminated. Under President Joe Biden, the Education Department revived the relief program and used it to cancel nearly $30 billion in debt owed by 1.6 million borrowers.

The Project on Student Predatory Lending backed a class-action lawsuit against the government that led to a 2022 settlement under which nearly 200,000 borrowers had their federal student debts eliminated. Maynard, 34, shed $38,000 in federal loans through that deal.

But she, like many borrowers, remained mired in private student loans. Maynard paid $700 a month to Navient for more than a decade for her private loans.

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, like Maynard, 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.

After Maynard’s federal loans were eliminated last year, she stopped making payments on her private loans and called Navient, seeking relief options.

A few months ago, Navient sent her its misconduct discharge form. Weeks later, she received the notice that her application had been approved.

The senators’ letter to Navient called its private loan discharge process “burdensome and confusing.” It also asserted a legal basis for borrowers’ claims that their loans should be canceled: the so-called holder-in-due-course rule, a 1975 regulation by the Federal Trade Commission that lets those who use certain types of loans contest the debt if the goods they bought were fraudulent.

The response that Navient sent the senators acknowledged the rule as a ground for claims. “We are committed to canceling all loans that meet the Holder Rule criteria,” Navient’s CEO, David Yowan, wrote in the letter, which was reviewed by The New York Times.

The letter said Navient had discharged “some” loans for borrowers who raised claims under the rule, and had “recently introduced an enhanced process for borrowers to seek discharge,” which it described as “still in its early stages.”

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.

Warren said in a written statement this week, “Navient has admitted responsibility for canceling their predatory loans but set up a process for cancellation that’s impossibly confusing for borrowers.”

Some trying to navigate the process have already failed.

Thomas Jean-Mastej had his federal loans for studies at American InterContinental University — a school cited by the Federal Trade Commission for deceptive recruiting tactics — canceled through the borrower defense program. In March, he filed a complaint with the Consumer Financial Protection Bureau about his private loans.

Navient responded by sending him the school misconduct discharge application form, which he submitted in mid-April. On May 10, he received a denial notice. It said Navient “carefully considers a variety of factors in determining whether a private loan should be discharged” but did not specify why his claim was rejected.

Jean-Mastej said he had hoped Navient “would have some compassion” — especially since he has, over the years, already repaid the company nearly $17,000 for a loan of just less than $7,000. He still owes almost $4,000.

Scores of others are in limbo, awaiting a response. Thomas Carter learned about Navient’s program on a Reddit forum. Following the steps recommended there, he filed a consumer bureau complaint, then received an application form from Navient. He sent it in three weeks ago.

“My thoughts were, like, why is this such a secret?” said Carter, who attended the Art Institute of York, in Pennsylvania. “You had to go through all these hoops to get the application.”

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