Navient Corp. Credit: Jonathan Weiss/Shutterstock.com

One of the largest student loan servicers in the United States will pay $95 million in restitution to borrowers as part of a near-$1.8 billion, multistate settlement announced Thursday.

The bulk of the settlement value comes from Navient's agreement to cancel $1.7 billion in debt, which will benefit approximately 66,000 borrowers, according to the California Attorney General's Office.

"Navient's harmful conduct impacted everyone from students who enrolled in colleges and universities immediately after high school to mid-career students who dropped out after enrolling in a for-profit school in the early-to-mid 2000s," according to a news release.

The lawsuits against Navient include an October 2017 action from the Pennsylvania Attorney General's Office and a June 2018 action from the California Attorney General's Office under the state's unfair competition and false advertising laws.

Along with California and Pennsylvania, the settlement includes 37 other states. It's subject to approval in various courts, with Pennsylvania filing a proposed consent decree in its federal case in the Middle District of Pennsylvania, and California filing a stipulation for entry of final judgment in San Francisco County Superior Court.

Navient is represented in the California case by Austin Klar, a partner with Kirkland & Ellis in San Francisco. 

Delaware Attorney General Kathy Jennings touted the deal in a news release that said student borrowers "are fighting an uphill battle."

"At a minimum, loan servicers should be expected to follow the law," Jennings said.

Delaware's Department of Justice "played a leading role in investigating Navient's alleged misrepresentations regarding the dischargeability of private student loans in bankruptcy," according to the release.

"Delaware's investigation focused heavily on a private loan known as a 'tuition answer loan,' which typically required borrowers to agree at the time of origination that the loan would not be dischargeable in bankruptcy," according to the news release. "The DOJ's Consumer Protection Unit reviewed promissory notes and interviewed nearly 100 Delaware borrowers during the course of its investigation."

California's release said the settlement "includes substantial injunctive terms to prevent future misconduct."

That includes requiring call agents to discuss "the benefits of income-driven repayment with all borrowers seeking to lower or stop their payments" and creating "a new cadre of repayment specialists trained to advise at-risk borrowers." Agents also will no longer be compensated "in a manner that encourages them to handle calls quickly" and will instead be ensured to "give thorough and accurate information to borrowers." The company also will "limit or reduce certain fees for late payments or entering forbearances," among other changes.

The $95 million will be doled out in approximately $260 increments to 350,000 borrowers. Navient will also pay $142.5 million to the attorneys general in 39 states, which along with California include Arizona, Arkansas, Colorado, Connecticut, Delaware, District of Columbia, Florida, Georgia, Hawaii, Iowa, Illinois, Indiana, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Missouri, Nebraska, Nevada, New Jersey, New Mexico, New York, North Carolina, Ohio, Oregon, Pennsylvania, Rhode Island, South Carolina, Tennessee, Vermont, Virginia, Washington, West Virginia and Wisconsin.