Navient, once one of the largest student loan servicers in the US, has agreed to a $120 million settlement to resolve a lawsuit brought by the US Consumer Financial Protection Bureau (CFPB).
The majority of the settlement will go to borrowers affected by the company’s practices.
The settlement stems from a 2017 lawsuit in which the CFPB accused Navient of misleading borrowers and mismanaging loan payments. The lawsuit alleged that the company steered borrowers into costlier repayment plans instead of lower-cost, income-driven options, and mishandled payment processing, which hurt the credit of disabled borrowers whose loans had been discharged.
If approved by the court, the settlement will bar Navient from servicing federal student loans, marking a permanent exit from the business for the company, which stopped federal loan servicing in 2021. Of the $120 million settlement, $100 million will be distributed to impacted borrowers, while $20 million will go to the CFPB as a fine.
“For years, Navient’s top executives profited handsomely by exploiting students and taxpayers… By banning the notorious student loan giant from federal student loan servicing, the CFPB will finally put an end to years of abuse,” CFPB Director Rohit Chopra said.
While the CFPB has not yet determined the exact number of consumers who will receive compensation, it estimates that hundreds of thousands of borrowers could benefit. Borrowers do not need to take any action, as payments will be sent by mail from the CFPB or its contractor once the settlement is finalized.
Navient agreed to the settlement without admitting wrongdoing.
“[The resolution]puts these decade-old issues behind us,” said the compay in a statement.
This agreement follows a separate 2022 settlement in which Navient agreed to cancel $1.85 billion in student loans to settle claims of predatory lending practices. Despite no longer servicing federal student loans, Navient continues to manage private loans for approximately 3.7 million borrowers.
