In September 2024, the Consumer Financial Protection Bureau (CFPB) settled with Navient, a once-major U. S. student loan servicer. Navient is banned from servicing federal Direct Loans and must pay $120 million in penalties and relief for affected borrowers.
For years, Navient made serious errors that caused borrowers to accumulate thousands of dollars in additional interest and lose progress toward forgiveness programs. The company also lied about what needed to be done to get cosigners off of private loans and how much credit score improvement borrowers could expect when getting federal loans out of default. This settlement aims to address these harmful practices and provide financial relief to affected borrowers.
CFPB Director Rohit Chopra described the action: “Today, we are closing the book on Navient –– one of the worst offenders in the student loan servicing industry, a company that has harmed millions of borrowers across the country. Today’s proposed order will permanently ban Navient from directly servicing federal Direct Loans and deliver $100 million to the borrowers they harmed. ”.
This settlement is part of a broader history of legal actions against Navient. Since taking over from Sallie Mae, the company has paid over $2 billion in previous settlements related to mishandling student loans. Many resulted from the U. S. Department of Education and state attorneys’ actions.
Is the Navient Lawsuit Real? Understanding the Allegations and Settlements
Recently, the Navient lawsuit has been in the news because it is one of the biggest settlements for student loan forgiveness to date. Is it true, and what does it mean for people who have student loans? I’ll talk about the lawsuit, the claims against Navient, and what it all means for your loans.
Navient Corporation, previously known as Sallie Mae, is one of the largest student loan servicers in the United States. They service private and federal student loans for over 12 million borrowers representing a total loan balance of over $300 billion.
The Claims Against Navient: In 2017, the Consumer Financial Protection Bureau (CFPB) sued Navient for allegedly using unfair and deceptive business practices that made people pay more on their student loans than they should have.
Some of the main allegations against Navient include
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Steering borrowers into forbearance instead of income-driven repayment plans. Forbearance allows you to temporarily pause payments, but interest still accrues and gets added to the principal balance. This increases your total debt.
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Failing to adequately notify borrowers about annual recertification requirements for income-driven plans. This resulted in higher payments and delayed loan forgiveness.
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Misallocating payments among multiple student loans. This often led to late fees, interest capitalization, and negative credit reporting even when the borrower made the full payment.
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hurting the credit of disabled borrowers, like severely injured veterans, by telling credit bureaus wrongly that their federal student loans were in default when they had been forgiven because of disability
A lot of state attorneys general have also sued Navient for making predatory private student loans and forbearance steering on federal student loans, in addition to the CFPB lawsuit.
The Navient Settlements
In January 2022, Navient reached a settlement agreement with 39 state attorneys general for $1.85 billion. This settlement provided:
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$1.7 billion in private student loan debt cancellation for about 66,000 borrowers who took out subprime private student loans to attend certain for-profit colleges with low graduation rates.
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$95 million in restitution payments of about $260 each for approximately 350,000 federal loan borrowers who were placed into certain types of long-term forbearances between 2009 and 2017.
The settlement with the state AGs resolved their claims, but the CFPB’s lawsuit is still ongoing.
In September 2024, Navient and the CFPB announced a proposed settlement that would provide additional relief, including:
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$100 million in redress payments to affected federal loan borrowers
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$20 million civil penalty
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Permanently banning Navient from federal student loan servicing
This settlement with the CFPB still needs final court approval, but seems likely to be approved based on previous history.
What This Means for Your Student Loans
If you took out private student loans from Navient to attend a for-profit college on the list of schools involved, check to see if your debt has been canceled under the $1.7 billion in relief.
If you had federal student loans serviced by Navient and were put into certain types of forbearance between 2009-2017, you may have received a $260 restitution payment.
For most other borrowers with federal loans serviced by Navient/Aidvantage, there is no individual action needed yet. However, the lawsuits and pressure on Navient could lead to improved servicing practices that benefit you as a borrower. Make sure you understand your options like income-driven repayment and public service loan forgiveness.
The bottom line is that the Navient lawsuits and settlements represent a major victory for student loan borrowers. The allegations confirmed many of the shady practices that borrowers have been complaining about for years. The financial relief won’t solve the student debt crisis, but it’s a step in the right direction toward holding student loan companies accountable.
What Happens to Your Loans After the Navient Settlement?
The Navient settlement marks the end of the company’s role in federal student loan servicing, but the problems borrowers have faced are far from over. Navient transferred its federal loan portfolio to new servicers, including Maximus (operating as Aidvantage) in 2021 and MOHELA in 2024. Unfortunately, many borrowers continue to report the same issues they experienced with Navient.
- Who will service your loans now? If your loans were previously serviced by Navient, they have been transferred to either Maximus/Aidvantage or MOHELA. These companies are now responsible for managing your loans, including processing payments, handling repayment plans, and overseeing loan forgiveness programs.
- Will my loan experience improve with MOHELA or Maximus? Despite hopes that the shift away from Navient would lead to better service, complaints persist with both MOHELA and other servicers. Borrowers continue to report issues such as lost paperwork, incorrect payment allocations, and delays in processing loan cancellations.
- Does the Navient settlement affect my private loans? The Navient settlement does not impact private student loans. If you have private loans still serviced by Navient, you will need to continue working with them or any other servicer managing those loans. Related: Navient Private Student Loan Forgiveness
- What should I do if I’m still facing issues? If you’re experiencing problems with your new loan servicer, file a complaint with the CFPB or your state attorney general’s office. Stay informed about your rights as a borrower, and keep detailed records of any communications or issues you encounter.
Navient may no longer be servicing federal student loans, but the broader systemic issues in the student loan industry remain. The shift to MOHELA or Maximus has not led to significant improvements for many borrowers, so stay proactive in managing your loans and seeking help if needed.
Who Qualifies for the Navient Settlement?
If you were a federal student loan borrower steered into forbearance instead of an income-driven repayment plan or experienced payment mismanagement or credit reporting issues, you may qualify for financial relief under the Navient settlement.
Here’s a breakdown of the borrower categories eligible for part of the $100 million in redress:
- Borrowers steered into forbearance: If you were guided into forbearance instead of an IDR plan, causing your interest to accrue and payments to increase, you may qualify for redress.
- Borrowers with misallocated payments: Navient mishandled payments for borrowers with multiple loans, leading to late fees, interest accrual, and negative credit reporting. If this happened to you, you could be eligible for compensation.
- Borrowers with credit reporting issues: Navient harmed the credit scores of disabled borrowers, including veterans, who had received a loan discharge due to total and permanent disability. If your credit was impacted by Navient’s errors, you may qualify for relief.
- Borrowers misled about cosigner release: Navient told private loan borrowers that if they paid down their loans in a certain way, they could apply for their cosigners to be released.
Federal Court Allows Lawsuit Against Navient To Continue
FAQ
Will Navient settle a CFPB lawsuit?
If approved by the court, the agreement will settle a 2017 lawsuit, in which the U. S. Consumer Financial Protection Bureau (CFPB) accused Navient of misleading student loan borrowers and not properly processing payments. Navient, which used to be a part of Sallie Mae, was one of the biggest companies in the country that took care of student loans.
Are there clues in Navient’s $120 million settlement?
Still, “there are some clues in the settlement” about eligibility, Kantrowitz said. The Consumer Financial Protection Bureau last week said it had reached a $120 million settlement with student loan giant Navient that could lead to compensation for hundreds of thousands of borrowers.
What does the Navient settlement mean for consumers?
The Navient settlement also aims to provide significant financial relief to consumers as it requires the company to pay $100 million in redress to harmed borrowers and a $20 million penalty into the CFPB victims relief fund, which is used to compensate consumers who have been harmed from violations of consumer financial protection laws.
Did Navient agree to a settlement without admitting wrongdoing?
Navient agreed to the settlement on Thursday without admitting any wrongdoing. In a press release, the company said that the deal “puts these ten-year-old issues behind us.” ” The U. S. Consumer Financial Protection Bureau tells TIME that hundreds of thousands of borrowers could receive payments.
Who will qualify for a $120 million settlement with Navient?
The Consumer Financial Protection Bureau reached a $120 million settlement with Navient that may lead to compensation for hundreds of thousands of borrowers. Higher education expert Mark Kantrowitz said that the CFPB has not made it clear who will be able to get consumer redress.
What is Navient v CFPB?
The agreement would resolve a lawsuit filed by the CFPB in 2017 that accused Navient of myriad predatory and abusive practices that allegedly caused thousands of student loan borrowers to pay more than they should have.
Do I qualify for the Navient lawsuit settlement?
You must have attended certain for-profit educational institutions like DeVry. The loans must have been disbursed between 2002 and 2014. You must have been delinquent for at least seven (7) billing cycles prior to June 30, 2021.
Is my Navient loan going to be forgiven?
Income-driven repayment (IDR) forgiveness
Plus, you may be eligible to receive Navient student loan forgiveness once you reach the end of your repayment schedule. Depending on the plan that you choose, you’ll be eligible for forgiveness in 20 to 25 years.
How much will borrowers get from a Navient settlement?
As part of that settlement, Navient agreed to pay $95 million for states to offer affected borrowers some reimbursement — roughly $260 each to 350,000 borrowers. The White House is one step closer to defunding public radio.
Will I get a check from the Navient lawsuit?
Restitution payments will be automatically distributed to eligible federal loan borrowers by the settlement administrator, Rust Consulting. If you are eligible for a payment, you will receive a postcard in the mail from the settlement administrator later this spring. Checks are expected to be sent by mail in mid-2022.