Business
Navient Settles for $120 Million Over Mismanagement of Student Loans
Navient has agreed to a $120 million settlement over allegations of mismanagement of student loans. This resolution aims to provide relief to affected borrowers and address systemic issues in student loan servicing.
Navient Reaches $120 Million Settlement Over Mismanagement of Student Loans
Navient, which was once one of the largest servicers of student loans in the United States, has agreed to a significant settlement of $120 million with federal regulators. This settlement aims to address serious allegations that the company misled borrowers and mishandled their loan payments over an extended period.
The Consumer Financial Protection Bureau (CFPB) announced that as part of this settlement, Navient will be permanently barred from managing federal student loans. The agreement mandates that the company pay $100 million in restitution to affected borrowers and an additional $20 million in penalties.
The CFPB’s lawsuit accused Navient of consistently failing its borrowers at various stages of repayment. Among the company’s alleged misdeeds, it was reported that Navient directed borrowers away from more affordable income-driven repayment plans, instead pushing them into forbearance. This practice not only increased the financial burden on borrowers but also enhanced Navient’s profits.
Rohit Chopra, the director of the CFPB, stated, “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 and ensuring the wind down of these operations, the CFPB will finally put an end to the years of abuse.”
During a media briefing, officials from the agency reassured borrowers that those eligible for restitution payments would not need to take any action. The CFPB plans to automatically mail checks to “hundreds of thousands” of federal student loan borrowers once it has analyzed the situation to determine who qualifies for payments. However, the timeline for this process remains unclear. The agency also cautioned borrowers to be vigilant against potential scammers who might misuse CFPB branding to extract money or personal information.
This settlement effectively concludes two significant legal actions against Navient that originated in 2017. These actions were initiated by the CFPB alongside two state attorneys general, later receiving support from a coalition of attorneys general from 27 additional states.