Navient, once one of the country’s largest student loan servicers, has reached a $120 million settlement with the Consumer Financial Protection Bureau (CFPB) — resulting in the company being permanently banned from servicing federal student loans.
In a settlement announced Thursday, the CFPB says that Navient would have to pay a $20 million penalty and provide $100 million in relief to those impacted borrowers. The bureau says it will mail checks to eligible borrowers, who do not need to take any action at this time.
The CFPB did not detail how much eligible borrowers would receive in terms of payments.
"For years, Navient’s top executives profited handsomely by exploiting students and taxpayers,” CFPB Director Rohit Chopra said in a statement.
"By banning the notorious student loan giant from federal student loan servicing and ensuring the winddown of these operations, the CFPB will finally put an end to the years of abuse," he added.
The settlement closes the loop on a 2017 lawsuit filed by the bureau, which claimed that the Virginia-based company (which was spun off from private student loan servicer Sallie Mae) misled student loan borrowers and processed their payments incorrectly.
In a detailed report, the bureau argued that Navient violated the Consumer Financial Protection Act, the Fair Credit Reporting Act and the Fair Debt Collection Practices Act. Additionally, the CFPB alleges that Navient misled and harmed student loan borrowers by:
- Misleading borrowers about income-driven repayment plans
- Botching payment processing
- Harming the credit of disabled borrowers, including severely injured veterans
- Deceiving borrowers about Navient’s requirements for cosigner release
- And, misleading borrowers about improving credit scores and the consequences of federal student loan rehabilitation
Navient, at the time, was one of the largest companies contracted by the U.S. Department of Education to service federal student loans. But in July 2021, the company announced it would no longer service federal student loans.
The former student loan provider serviced loans for more than 12 million borrowers and roughly $300 million in federal and private student loans, the CFPB said.
Navient, which split off from Sallie Mae 10 years ago, said in a statement that the agreement puts "these decade-old issues behind us." The company said it does not agree with the CFPB’s allegations.
"While we do not agree with the CFPB’s allegations, this resolution is consistent with our go-forward activities and is an important positive milestone in our transformation of the company," Navient said.
In 2022, Navient reached a deal with 39 state attorneys general and agreed to cancel $1.7 billion in student loan debts owed by roughly 66,000 borrowers.
The 2022 settlement ended another years-long legal fight with states where Navient faced two serious allegations.
At the time, the company was accused of steering student borrowers into expensive forbearances instead of more flexible, income-driven repayment plans. The company also faced allegations that its former owner, Sallie Mae, had made subprime private loans to vulnerable borrowers who it knew were likely to default.
As part of that settlement, Navient agreed to pay $95 million for states to offer affected borrowers some reimbursement — roughly $260 each to 350,000 borrowers.
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