CFPB files order against student loan servicer for violations

The Consumer Financial Protection Bureau (CFPB) filed an order against the student loan servicing company Navient for alleged violations.

If entered by the court, the proposed order would permanently ban the company from servicing federal Direct Loans, the CFPB said. It would also forbid the company from directly servicing or acquiring most loans under the Federal Family Education Loan Program.

The CFPB’s order said that Navient steered numerous student loan borrowers into costly repayment options. It also alleges that Navient illegally deprived student borrowers of opportunities to enroll in more affordable income-driven repayment plans.

Under the terms of the order, Navient would have to pay a $20 million penalty and provide $100 million in redress for harmed borrowers.

“For years, Navient’s top executives profited handsomely by exploiting students and taxpayers,” CFPB Director Rohit Chopra said. “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.”

This proposed order complements actions already taken by the Department of Education and state attorneys general to provide redress to borrowers impacted by Navient.

“I applaud the CFPB for obtaining concrete relief for borrowers and deterring similar failures in the future,” U.S. Under Secretary of Education James Kvaal said. “Today’s action builds on the Biden-Harris Administration’s work to hold loan servicers accountable and protect borrowers, including more than 1 million borrowers who have received debt relief by fixing past failures to properly track progress toward forgiveness, such as correcting harms from forbearance steering.”

The CFPB sued Navient in 2017 for repayment violations. At the time of the lawsuit, Navient, formerly known as Sallie Mae, was the largest student loan servicer in the United States. It serviced student loans of more than 12 million borrowers, including more than 6 million accounts under its contract with the Department of Education. Overall, the company serviced more than $300 billion in federal and private student loans.

In 2021, Navient’s contract with the Department of Education to service Direct Loans ended. Early in 2024, Navient said it intended to transfer the servicing of its remaining loans to another servicer.

Navient violated the Consumer Financial Protection Act, the Fair Credit Reporting Act, and the Fair Debt Collection Practices Act. In addition, the CFPB alleges Navient harmed student loan borrowers by misleading borrowers about income-driven repayment plans; botching payment processing; harming the credit of disabled borrowers, including severely injured veterans; deceiving borrowers about Navient’s requirements for cosigner release; and misleading borrowers about improving credit scores and the consequences of federal student loan rehabilitation.

The CFPB will mail checks to consumers who are eligible to obtain redress under the settlement. Consumers do not need to do anything to obtain redress. The CFPB will never require consumers to pay money to obtain redress, nor will we ask for additional information before consumers can cash a redress check that we’ve issued.

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