A proposed deal with the Consumer Financial Protection Bureau requires Navient to pay $120 million in fines and restitution to the borrowers who were damaged by its conduct, in addition to being prohibited from servicing federal student loans.
Nearly eight years have passed since the CFPB sued Navient, then known as Sallie Mae, before the agreement was revealed on Thursday. According to a CFPB probe, Navient led student loan borrowers away from less expensive income-based options and toward more expensive repayment plans. In addition to $20 million in fines, Navient will have to pay $100 million in distributions to hundreds of thousands of borrowers.
The proposal ends the lawsuit that the federal watchdog first brought to federal court in Pennsylvania in 2017. According to the CFPB, the company managed over 12 million student loan customers at the time, making it the largest student loan servicer in the nation. The government said that the massive loan servicing company mishandled payment processing, harming the credit of disabled borrowers whose loans were dismissed.
CFPB Director Rohit Chopra told reporters on Thursday, “Today we are closing the book on Navient, one of the worst offenders in the student loan servicing industry, and a company that has harmed millions of borrowers across the country.”
Navient transferred its contract to another company in 2021, and as of that date, it no longer purchases or services federal student loans.
The Herndon, Virginia-based company released a statement on Thursday saying, “Although we disagree with the CFPB’s allegations, this resolution is consistent with our go-forward activities and is an important positive milestone in our transformation.” It had previously made the decision to contract out the servicing of some legacy portfolios of student loans.
In a statement, Chopra said that “Navient’s top executives profited handsomely for years by exploiting students and taxpayers.” “By banning the notorious student loan giant from federal student loan servicing and ensuring the wind-down of these operations, the CFPB will finally put an end to the years of abuse.”
In a press call, a CFPB official stated that hundreds of thousands of customers will receive compensation as a result of the agreement.
For the business, this settlement is not unprecedented. It came to a $1.85 billion agreement with 39 states in 2022 and consented to pay back roughly 66,000 student loans in order to resolve accusations that it had used predatory lending practices.