Signage of Navient office
Navient, one of the largest student loan servicers in the U.S., has agreed to a $120 million settlement following allegations by the Consumer Financial Protection Bureau (CFPB) of widespread illegal practices.
The lawsuit, which began in 2017, accused Navient of steering borrowers into more expensive repayment plans and making processing errors that harmed borrowers’ credit. The settlement includes $100 million allocated to compensating affected borrowers and $20 million in fines.
The CFPB Director called this resolution a victory for borrowers, ensuring that Navient is banned from servicing federal student loans in the future. This case, stretching over several years and involving multiple administrations, highlights long-standing problems in the student loan industry and sets a precedent for better regulation of loan servicers.
Borrowers impacted by Navient’s actions are expected to receive compensation once the settlement is approved.
Some Navient customers have received debt relief from Biden.
The Biden administration has taken steps to alleviate the burden of student debt, particularly focusing on borrowers who were wrongly steered into forbearance instead of being offered more affordable repayment options like income-driven repayment plans. Forbearance temporarily halts payments, but interest continues to accumulate, ultimately increasing the cost for borrowers.
To date, $51 billion in student debt has been forgiven for approximately 1 million borrowers. This relief is part of a broader effort to address abuses by loan servicers like Navient, whose practices have long been criticized for prioritizing forbearance over better alternatives. The Department of Education found that servicers often did not follow the rules governing forbearance, which limit its use to 12 months consecutively or 36 months in total
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