The government's top consumer watchdog has banned Navient from servicing federal student loans and ordered the company to pay $120 million for allegedly defaulting on loans.
The settlement announced Thursday comes nearly eight years after the Consumer Financial Protection Bureau (CFPB) sued Navient, a former division of Sallie Mae, in 2017.
The CFPB accused the loan servicing giant of harming student loan borrowers by misleading them about income-contingent repayment plans, improperly processing payments, and discrediting disabled borrowers whose loans were forgiven.
At the time, Navient was the U.S. Department of Education's largest loan servicer, but in 2021 the company announced it would no longer service federal loans.
Under the terms of the settlement, Navient will be barred from participating in any future federal student loan repayment competitions.
“Today, we are ending our relationship with Navient, a company that is one of the worst offenders in the student loan servicing industry and has harmed millions of borrowers across the country,” CFPB Director Rohit Chopra told reporters Thursday morning.
Navient must pay a $20 million penalty plus $100 million in restitution to be distributed to hundreds of thousands of borrowers.
“This agreement puts a decade-old problem behind us. While we disagree with the CFPB's allegations, this resolution is consistent with our future work and marks an important, positive milestone in our transformation,” Navient said in a statement.
