The U.S. Consumer Finance Protection Bureau has taken action to permanently prohibit Navient from directly servicing federal student loans, alleging widespread abuse by the financial services company. The proposed order, agreed to by Navient without admitting fault, includes a $20 million penalty and $100 million in relief for impacted borrowers. CFPB Director Rohit Chopra condemned Navient as one of the worst offenders in student loan servicing, stating that the company harmed millions of borrowers over the years.
The investigation into Navient, which separated from Sallie Mae in 2014, began almost a decade ago, culminating in a lawsuit by the agency for predatory practices such as leading borrowers into costly repayment plans and mishandling payments. Subsequently, various states also delved into allegations against Navient, resulting in debt cancellations for numerous borrowers across the nation. In 2022, Navient settled with 39 state attorneys general for $1.85 billion.
Following the filing of the CFPB’s order, Navient expressed that the settlement puts past issues behind them, though they disagreed with the allegations. Despite formerly being a major student loan servicer in the U.S., Navient clarified that it no longer services or acquires federal student loans. Instead, third-party entities now handle these tasks, such as Maximus servicing direct loans and MOHELA handling legacy loans.
In addition to banning Navient from servicing direct federal loans, the CFPB’s order would restrict the company from acquiring a majority of FFEL loans, federally-backed private loans dispersed through a program that concluded in 2010. Notably, at the time of the lawsuit in 2017, Navient serviced student loans for over 12 million borrowers and managed more than $300 billion in federal and private loans.
The CPFB’s move was commended by U.S. Under Secretary of Education James Kvaal, highlighting broader initiatives from the Biden-Harris administration to hold loan servicers accountable. These efforts have resulted in over $50 billion in debt relief for more than 1 million borrowers due to forbearance misuses and adjustments in income-driven repayment plans. The impact of the proposed settlement is viewed as a crucial step towards safeguarding borrowers in the future.
