Navient, one of the nation's largest student loan companies, has inked a $1.85 billion settlement with a coalition of state attorneys general to resolve allegations that it steered borrowers into costly repayment plans and predatory loans.

The agreement to be announced Thursday puts to rest multiple state probes into the company's loan servicing and lending practices dating back to when it was known as Sallie Mae. The agreement spans 39 states and D.C. and will deliver $1.7 billion in private student loan cancellation to 66,000 borrowers nationwide, and another $95 million in payouts.

"This settlement not only holds [Navient] accountable but brings real relief to hundreds of thousands of Americans who are struggling to pay their student loans," Pennsylvania Attorney General Josh Shapiro, who helped lead the coalition, said in an interview. "We're going to hold the powerful institutions in this country accountable when they take advantage of people."

Navient vehemently denies all charges and insists there is no evidence to substantiate the allegations. The decision to settle was purely an economic one, according to the company, as it would cost less to resolve the cases, some of which are more than eight years old, than to fight each individual lawsuit.

"This is really about eliminating a time-consuming, distracting and costly process," Jack Remondi, Navient's chief executive, said in an interview. "With the ability to explicitly deny the claims that were made in these cases and borrower harm, I think it's noteworthy that we're not giving up on our defense here. We're just agreeing that it's time to move on."

Shapiro contends that "actions speak louder than words" and that in the end, a corporation that placed "profits before people" is being held to account.

Pennsylvania is among several states, including Illinois, California and Washington, that accused Navient of encouraging struggling borrowers to postpone payments through forbearance rather than enroll in low-cost repayment plans tied to their income.

Prosecutors said the company - which long managed federal student loans on behalf of the Education Department but said in the fall that it would transfer accounts to another company - opted for a faster, cheaper route that requires less paperwork. But prosecutors say the move cost borrowers as the accumulated unpaid interest on their loans were tacked onto their balances. The states allege that Navient customers who were enrolled in multiple, consecutive forbearances from January 2010 to March 2015 had more than $4 billion in accrued interest added to their principal.

About 350,000 federal student loan borrowers who were placed in certain types of long-term forbearances will receive payments of about $260. Eligible borrowers will receive a postcard in the mail this spring from the settlement administrator.

The lion's share of the settlement money will arrive in the form of debt cancellation for tens of thousands of people who borrowed money from Sallie Mae to primarily attend for-profit colleges, including ITT Technical Institutes and the chain of Art Institute schools.

State prosecutors claim the lender originated private student loans that carried interest rates as high as nearly 16% and fees equal to 9% of the loan. Those "subprime" loans were provided to students with poor credit and who attended colleges where barely 50% of people graduated, prosecutors say - an indicator that borrowers were at risk of not completing their degrees and being unable to repay the debt.

Sallie Mae allegedly used those private loans to develop relationships with colleges and universities. In the lead-up to the 2008 recession, colleges had what's known as preferred lender lists, made up of companies that offered a full suite of federal and private loans. Although Sallie Mae expected its subprime loans to default en masse, prosecutors say, having the loans as an option in the company's package was critical to persuade schools to include them on the lender list.

Navient absorbed Sallie Mae's liabilities and 95% of its assets, including servicing rights to $300 billion in student loans, when the companies split in 2014. That means Navient is responsible for any expenses, losses and remediation arising from the lawsuits.

The company disputes the characterization of Sallie Mae's lending strategy and said it stopped lending to students at troubled schools long before the Education Department cut them off. The loans in question have largely been in default for a number of years, and Navient said it did not expect to recover much of what was owed.

Nicole Scavo, 33, is one of the beneficiaries of the debt forgiveness. She received a call from Shapiro's office informing her that the $81,685 she owed for her certificate in restaurant management from the Art Institute of New York City, which closed in 2019, would be canceled.

"I can't explain how grateful I am," said Scavo, whose training never yielded a job in the field. "These loans affect everything. Because my debt-to-income is so high, I can't get good rates on a car loan or a mortgage."

Scavo, who works for a pharmacy in Pennsylvania, originally borrowed about $39,000 in 2007, but the interest rate on her loans ranged from 9% to 12%. She struggled to keep up with her payments over the years and worried that the debt would make homeownership impossible. Now, she said she is looking forward to a financial future with better possibilities.

Borrowers who are eligible for loan forgiveness will receive a formal notice from Navient by July, along with refunds of any payment made on the canceled private loans after June 30. No action is needed to qualify for relief.

The agreement, filed Thursday in the U.S. District Court for the Middle District of Pennsylvania, requires court approval.