ITEM 1.01 Entry into a Material Definitive Agreement
On January 13, 2022, Navient Corporation (the "Company"), and the Company's
subsidiaries Navient Solutions, LLC and Pioneer Credit Recovery, Inc., entered
into a series of Consent Judgment and Orders (the "Agreements") with 40 State
Attorneys General to resolve all matters in dispute related to the previously
disclosed lawsuits filed by the Commonwealth of Pennsylvania and the States of
Washington, Illinois, California, New Jersey and Mississippi as well as the
related investigations, subpoenas, civil investigative demands and inquiries
from various other State Attorneys General (collectively, the "Actions") subject
to final court approval. These Agreements do not resolve the previously
disclosed litigation involving the Company and the Consumer Financial Protection
Bureau.
Navient believes strongly that its policies and practices are sound, expressly
denies the allegations and expressly denies that it has violated any law or
engaged in any action that has harmed borrowers. After years of discovery, no
evidence was produced to substantiate these claims. The Company resolved the
Actions to avoid the continued burden, expense, time and distraction of
state-by-state litigation and investigations.
Navient will cancel loan balances of approximately 66,000 borrowers with
qualifying private education loans that were originated largely between 2002 and
2010 and later defaulted and charged off. The majority of these borrowers
attended for-profit schools that were closed years after the loans were
originated due to actions taken by various state or federal agencies. Navient
will notify the affected borrowers and co-borrowers shortly after the Agreements
receive final court approvals. The loans to be cancelled have aggregate
outstanding balances of approximately $1.7 billion. The pre-tax expense to the
Company to cancel these loans is approximately $50 million which represents the
amount of expected future recoveries of these charged-off loans on the balance
sheet.
In addition, the Company will make a one-time payment of approximately $145
million to the states. A portion of that payment will reimburse the states for
their costs with the remaining funds to be used by the states to provide
payments to certain student loan borrowers as determined by the states. Navient
also has agreed to maintain servicing practices that support borrower success,
nearly all matching the company's long-established practices.
In the fourth quarter of 2021, the Company recognized regulatory expenses of
approximately $170 million on an after-tax basis. Navient estimates that these
costs are substantially lower than the expected costs of ongoing state
litigation and investigations and historically these matters have represented
the vast majority of our regulatory costs. Prior to the fourth quarter, this
contingent liability was neither probable nor reasonably estimable and, as a
result, no contingent liability had been previously established. The Company
anticipates no changes to its previously announced capital return strategy.
The foregoing description of the Agreements does not purport to be complete and
is qualified in its entirety by reference to the full text of the Agreements, a
copy of which will be filed and incorporated by reference as an exhibit to the
Company's 2021 Annual Report on Form 10-K.
Item 7.01 REGULATION FD DISCLOSURE
The Company frequently provides relevant information to its investors via
posting to its corporate website. On January 13, 2022, a fact sheet entitled
"Frequently Asked Questions: Navient Resolution of Legal Matters with State
Attorneys General" is being made available on the Investor page of the Company's
website at https://navient.com/investors/ and is attached hereto as Exhibit 99.2
and incorporated herein by reference.
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The information contained in, or incorporated into, Item 7.01 and Item 8.01,
including Exhibits 99.1 and 99.2 attached hereto, is being furnished and shall
not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act
of 1934, as amended, nor shall it be deemed incorporated by reference in any
filing under the Securities Act of 1933, as amended, except as shall be
expressly set forth by specific reference in such filing.
ITEM 8.01 OTHER MATTERS
On January 13, 2022, the Company issued a news release announcing that it and
two of its subsidiaries entered into a series of Consent Judgment and Orders
discussed in Item 1.01 and incorporated herein by reference. A copy of the news
release is attached hereto as Exhibit 99.1 and incorporated herein by reference.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits
Exhibit No. Exhibit
99.1 News Release Dated January 13, 2022
99.2 Frequently Asked Questions: Navient Resolution of Legal Matters
with State Attorneys General
104 Cover Page Interactive Data File (embedded within the Inline XBRL
document).
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