The Consumer Financial Protection Bureau yesterday announced a proposed settlement with Navient, one of the largest student loan servicers in the country. The settlement would require Navient to pay $120 million in fines and restitution to consumers while also banning it from servicing federal student loans. if the settlement is approved by a federal judge, it will bring an end to a case that began seven years ago.
Why It Matters: Navient, previously known as Sallie Mae, was once the largest federal student loan servicer, handling accounts for over 12 million borrowers. The company has been under intense scrutiny since 2017, when the CFPB filed a lawsuit accusing it of steering borrowers into expensive forbearance options instead of income-driven repayment (IDR) plans, which would have saved them money and potentially led to loan forgiveness. Navient announced back in 2021 that it was exiting the federal student loan servicing market.
- Navient announced a settlement in 2022 with 39 state attorneys general that saw it cancel $1.7 billion in student loans.
The big picture: Navient was accused of widespread misconduct in its student loan servicing practices, including:
- Steering borrowers into forbearance instead of income-driven repayment plans
- Mishandling payments and credit reporting
- Providing misleading information about repayment options
What they’re saying: “For years, Navient’s top executives profited handsomely by exploiting students and taxpayers,” said CFPB Director Rohit Chopra.
- “During its decade-long reign as the nation’s dominant student loan firm, Navient and its executives engaged in stunning levels of abuse and fraud, causing widespread financial hardship for people with student debt,” said Mike Pierce, executive director of the Student Borrower Protection Center and a former CFPB official. “Navient’s abuses ruined lives and undermined public faith in the student loan system itself.”
The other side: Said a Navient spokesperson: “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,”
