Editor's note: This story has been updated to clarify that Navient has been banned only from servicing student loans.
Navient, one of the largest student loan companies in the U.S., has been banned from servicing federal student loans by the Consumer Financial Protection Bureau − a practice the company said it stopped in 2021.
Thursday's decision grew from a civil suit filed in 2017 against the company formerly known as Sallie Mae, which is headquartered along the Wilmington Riverfront. According to the initial complaint, Navient "prevented some of the most financially vulnerable borrowers from securing some or all of the benefits of plans that were intended to ease the burden of unaffordable student debt."
The company also misreported information to consumer reporting agencies about borrowers with permanent disabilities, claiming that the borrowers had defaulted on their loans and damaging their credit.
Navient was previously ordered to provide $1.85 billion in relief to borrowers to settle these claims as part of a multistate agreement in early 2022. More than 1,500 Delaware borrowers received a payment of around $260, and 145 Delaware borrowers had a combined $4.8 million in private loan debt canceled.
“For years, Navient’s top executives profited handsomely by exploiting students and taxpayers,” said CFPB Director Rohit Chopra in a press release. “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.”
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The new order bans Navient from most federal student loan activities. If Navient is in charge of any remaining loans, it must "take a series of steps to help ensure borrowers’ rights are protected."
The order also requires Navient to pay $100 million in redress for affected consumers and a $20 million penalty to the CFPB's victims relief fund.
"This agreement puts these decade-old issues behind us," Navient said in a press release following Thursday's agreement. "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."
A Navient spokesperson added that the items in the consent order "are primarily related to activities Navient does not engage in."
Send story tips or ideas to Hannah Edelman at hedelman@delawareonline.com. For more reporting, follow them on X at @h_edelman.
This article originally appeared on Delaware News Journal: Student loan company Navient banned from loans in new settlement for misleading borrowers
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