Navient, once the nation’s largest student loan servicer, has been permanently banned from servicing federal student loans and ordered to pay a $120 million settlement for alleged regulatory violations and predatory practices.
At a Glance
- Navient banned from servicing federal student loans and ordered to pay $120 million
- CFPB accuses Navient of steering borrowers into costly repayment options
- Settlement includes $100 million in restitution and a $20 million civil fine
- Navient disagrees with allegations but views settlement as a positive milestone
CFPB Takes Action Against Navient
The Consumer Financial Protection Bureau (CFPB) has taken decisive action against Navient, formerly one of the largest student loan servicers in the United States. The company has been permanently barred from servicing federal student loans and ordered to pay a substantial $120 million settlement. This move comes after years of alleged misconduct and regulatory violations that the CFPB claims harmed millions of borrowers across the country.
The ban prevents Navient from servicing federal direct loans and most loans under the Federal Family Education Loan Program. This action effectively removes Navient from a significant portion of the student loan market, where it once held a dominant position.
Today, @CFPB is ordering @Navient to pay $120 million in refunds and penalties for its wide-ranging student loan servicing failures. More importantly, Navient, formerly known as Sallie Mae, will be banned from ever directly servicing federal student loans. https://t.co/NmMuALn1wO
— Rohit Chopra (@chopracfpb) September 12, 2024
Allegations of Misconduct
The CFPB’s case against Navient includes a range of serious allegations. The bureau accused the company of steering borrowers into expensive repayment options, exploiting servicemembers through overcharges, and engaging in misleading lending activities. These practices allegedly caused borrowers to incur higher interest payments and face unnecessary financial hardships.
“For years, Navient’s top executives profited handsomely by exploiting students and taxpayers,” said CFPB Director Rohit Chopra. “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.”
The CFPB’s investigation revealed that Navient violated multiple consumer protection laws, including the Consumer Financial Protection Act, Fair Credit Reporting Act, and Fair Debt Collection Practices Act. These violations allegedly resulted in widespread harm to borrowers, particularly those already struggling with their student loan debt.
Settlement Details and Impact
The $120 million settlement includes $100 million in restitution for affected borrowers and a $20 million civil fine. This significant financial penalty is intended to provide some relief to the hundreds of thousands of borrowers impacted by Navient’s alleged misconduct.
“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,” the Herndon, Virginia-based company said Thursday in a statement.
Despite the company’s disagreement with the allegations, the settlement marks a turning point in the ongoing efforts to hold student loan servicers accountable for their practices. The CFPB has been supervising the student loan market since 2013 and has identified numerous failures in the income-driven repayment system.
Broader Implications for the Student Loan Industry
This action against Navient is part of a larger effort to enforce accountability within the loan servicing industry. The CFPB’s investigation has already led to more than $50 billion in debt relief for over 1 million borrowers. This settlement sends a strong message to other loan servicers about the consequences of engaging in predatory or misleading practices.
As the student loan landscape continues to evolve, borrowers and taxpayers alike will be watching closely to see how this settlement impacts the industry as a whole. The CFPB’s actions demonstrate a commitment to protecting consumers and ensuring that student loan servicers operate within the bounds of the law.
