$1.7 billion in student loan debt has been canceled. Here’s what to know.

A newly graduated student is seen in Ankara, Turkey on November 7, 2017. 

A newly graduated student is seen in Ankara, Turkey on November 7, 2017. 

Anadolu Agency/Getty Images

Student loan borrowers in Connecticut will soon receive cash payments as part of a $1.85 billion settlement the state reached with student loan provider Navient, formerly part of Sallie Mae Bank. The settlement was part of a coalition comprised of 39 attorneys general who sought restitution and debt cancellation for student loan borrowers following the company’s alleged “unfair and deceptive” loan practices. The loan servicer will cancel $1.7 billion in student loan debt owed by approximately 66,000 borrowers, according to NPR

But which student loan borrowers will be affected by the settlement? And how will they know if their debt has been canceled? Here’s how the Navient student debt cancellation and restitution affects Connecticut borrowers. 

How many people in Connecticut will be affected by the Navient settlement?

According to the office of Connecticut Attorney General William Tong, 1,339 borrowers will receive a total of $19 million in direct private loan debt relief, and 4,875 borrowers will receive nearly $1.3 million in restitution. 

How do I know if my student debt was canceled?

Borrowers receiving loan debt cancellation will receive a notice from Navient by July 2022, according to Attorney General Tong’s office. At this time, they will also receive any refunds on payments made on the canceled loans after June 30, 2021. 

How will I receive restitution payment?

Borrowers who are eligible for a restitution payment — money paid as compensation to loan borrowers placed in certain long-term loan forbearances — will receive approximately $260, according to Attorney General Tong’s office. They will be notified by a postcard in the mail from the settlement administrator this spring.

What is forbearance?

According to the Federal Student Aid website, forbearance is a period in which a borrower is authorized to not make payments on their loan or temporarily make smaller payments. In this time of nonpayment, interest still might accrue on the loan. 

Who is eligible for debt cancellation?

The office of the attorney general for Massachusetts clarifies the borrowers that are eligible for student debt cancellation as those “who took out private subprime student loans (made to borrowers with low credit scores) through Navient’s predecessor, Sallie Mae, between 2002 and 2014, and then had more than seven consecutive months of delinquent payments prior to June 30, 2021.”

Debt cancellation can also apply to those with “non-subprime private student loans” that were issued by Sallie Mae Bank and other lenders between 2002 and 2014 for borrowers who attended specific for-profit schools, the office notes. These schools include University of Phoenix and Lincoln Technical Institute, among others. For these loans to qualify for cancellation, the office notes that the loan “must have been in past due status for more than seven consecutive months prior to June 30, 2021.”

Who is eligible for restitution payment?

Those who can receive restitution payment must live in a restitution-participating state (like Connecticut) as of January 2017 and entered repayment on a direct or FFEL Program loan (Family Federal Education Loan) before January 2015, according to the Massachusetts attorney general’s office. They also need to have had at least one federal loan that was eligible for income-driven repayment.

Borrowers eligible for restitution must have had “at least two years of consecutive verbal or administrative forbearance between October 2009 and January 2017, where at least one of the forbearances was entered through a phone call, and where at least half of the forbearance time was prospective (i.e., not used to bring a past-due loan current),” the Massachusetts attorney general’s office notes. 

Finally, eligible borrowers must have not enrolled in an income-driven repayment plan before the forbearance period. 

Do I need to do anything to benefit from the settlement?

According to NerdWallet, cancellation of debt will be automatic, and borrowers will not have to do anything to have the cancellation take effect. 

How do I know if Navient is my student loan servicer?

According to the Federal Student Aid website, borrowers can identify their loan servicer by logging into their studentaid.gov account, navigating to their account dashboard and viewing the “My Loan Servicers” section. They may also call Federal Student Aid Information Center (FSAIC) at 1-800-433-3243. 

For private loan servicers, the Massachusetts attorney general’s office notes that borrowers should look for their most recent bill or check their credit report.