The government’s top consumer watchdog is banning Navient from federal student loan servicing and ordering the company to pay $120 million for alleged lending failures.
The settlement announced Thursday comes almost eight years after the Consumer Financial Protection Bureau (CFPB) sued Navient, formerly part of Sallie Mae, in 2017.
The CFPB accused the loan-servicing giant of harming student loan borrowers by misleading them about income-driven repayment plans, mishandling payment processing and tarnishing the credit of disabled borrowers whose loans had been discharged, among other allegations.
At the time, Navient was the largest loan servicer for the U.S. Department of Education. But in 2021, the company announced it would no longer service federal loans.
Under the terms of the settlement, Navient will be barred from ever again competing to service federal student loans.
“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,” CFPB Director Rohit Chopra told reporters Thursday morning.
In addition to a $20 million penalty, Navient will be required to pay $100 million in redress, to be distributed among hundreds of thousands of borrowers.
“This agreement puts these decade-old issues behind us. 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,” Navient said in a statement.
