WASHINGTON, D.C. — In a significant move against one of the largest student loan servicers in the United States, the Consumer Financial Protection Bureau (CFPB) has filed a proposed order targeting Navient for longstanding failures and regulatory breaches. If approved by the court, this order will permanently remove Navient from the federal student loan servicing landscape, banning it from servicing federal Direct Loans and curbing most activities under the Federal Family Education Loan Program (FFELP).
The proposed order comes in response to Navient’s history of steering borrowers into costly repayment options, denying them access to more affordable income-driven repayment plans. This practice, deemed illegal by the CFPB, forced many borrowers to pay significantly more than they needed to. As part of the enforcement action, Navient will be required to pay a $20 million penalty and provide $100 million in redress to affected borrowers.
CFPB Director Rohit Chopra emphasized the need for stringent measures, stating, “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 winddown of these operations, the CFPB will finally put an end to the years of abuse.”
Navient, headquartered in Herndon, Virginia, previously operated as Sallie Mae and was once the largest student loan servicer in the nation. At the time of the CFPB’s lawsuit in 2017, Navient managed the loans of over 12 million borrowers, encompassing more than $300 billion in federal and private student loans. However, its practices have been under scrutiny, leading to multiple lawsuits and settlements over the years.
The U.S. Under Secretary of Education James Kvaal supported the CFPB’s actions, stating, “I applaud the CFPB for obtaining concrete relief for borrowers and deterring similar failures in the future.” He noted that this action aligns with the broader efforts of the Biden-Harris Administration to protect borrowers and hold loan servicers accountable.
The CFPB’s investigation into Navient highlighted various violations, including the failure to notify borrowers about annual recertification requirements for income-driven repayment plans. Navient’s mishandling of payment allocations and its misleading communications about cosigner release and credit score improvements further compounded its regulatory breaches.
Navient’s illegal steering into forbearance was particularly detrimental, as interest continued to accrue, leading to higher balances for borrowers. The CFPB’s lawsuit revealed that Navient’s actions were not isolated incidents but part of a systemic approach to maximize profits at the expense of borrowers’ financial well-being.
The repercussions of these practices extend beyond individual borrowers. The CFPB’s actions have spurred further investigations by state attorneys general and other federal agencies, resulting in over $50 billion in debt relief for more than 1 million borrowers. These efforts have addressed widespread issues within the income-driven repayment program, correcting forbearance steering and payment miscounts.
With Navient’s contract with the Department of Education having ended in 2021, the proposed ban ensures that the company cannot re-enter the federal student loan servicing market. This decision marks a pivotal step in safeguarding the interests of student loan borrowers and enforcing compliance with consumer protection laws.
The CFPB’s proposed order against Navient represents a critical effort to uphold accountability within the student loan industry. By addressing past misconduct and preventing future violations, the order seeks to rectify the financial harm inflicted on borrowers and promote a more equitable system for managing student debt.
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