Navient, one of the largest student loan servicers, agreed to a $120 million settlement with the Consumer Financial Protection Bureau (CFPB) following accusations of widespread student loan misconduct.
The settlement will permanently ban Navient from servicing federal Direct Loans and from acquiring most Federal Family Education Loan Program (FFELP) loans. The CFPB said Navient used abusive practices for years. Navient disagreed, but said in a statement it settled the matter to put the case behind it.
Payments to Borrowers
Navient will pay $100 million to harmed borrowers and an additional $20 million in penalties. The CFPB’s investigation, launched in 2017, revealed numerous violations, including claims that Navient steered borrowers into costly forbearance plans instead of income-driven repayment (IDR) plans, causing borrowers to accrue unnecessary interest.
The CFPB order outlines significant changes for Navient’s operations, effectively ending the company’s role in servicing federal student loans. The CFPB alleges that Navient’s failures extended to misinforming borrowers about PSLF (Public Service Loan Forgiveness) and misapplying payments, which led to additional fees and negative credit reporting for affected borrowers. The order also requires Navient to improve its borrower communications, particularly around income-driven repayment recertifications, cosigner releases, and loan payoffs.
CFPB Director Rohit Chopra condemned Navient’s actions. “For years, Navient’s top executives profited handsomely by exploiting students and taxpayers,” he said in a statement.
Navient (NASDAQ: NAVI), headquartered in Herndon, Va., was formerly known as Sallie Mae. When the CFPB’ filed its lawsuit in 2017, Navient was the largest U.S. student loan servicer. It serviced student loans of more than 12 million borrowers, including $300 billion in federal and private student loans.
The CFPB’s action is part of a broader effort to hold loan servicers accountable, with more than $50 billion in debt relief already granted to over one million borrowers. The settlement, alongside actions by state attorneys general and the Department of Education, aims to correct systemic issues in student loan servicing and ensure borrowers receive the assistance and relief they are entitled to under federal programs.
