One of the nation’s largest student loan companies has officially settled a yearslong battle following allegations of student loan misconduct.
The Washington Post reports that Navient has reached a $120 million settlement to clear up accusations of student loan misconduct, including misallocating payments, steering people into costly repayment plans, supplying wrong information, and ignoring borrowers’ requests for help.
The majority of the settlement will be used to pay affected customers, who will be determined by the Consumer Financial Protection Bureau. Eligible consumers won’t need to do anything on their end; instead, $100 million of the settlement will be dispersed via mailed checks.
The other $20 million from the settlement will be distributed into the CFPB penalty fund.
“It was a hard-fought battle to really make sure that this wasn’t just about a fine, but that this would actually end Navient’s years of abuses,” said CFPB Director Rohit Chopra.
After a 2017 lawsuit accused Navient of being “far more concerned with its financial interests than the needs of vulnerable student loan borrowers,” it was alleged that instead of enrolling borrowers into income-driven repayment plans to save money, the company encouraged the postponement of payments through forbearance.
Per a court filing, the CFPB identified student borrowers who received information about income-based plans via phone calls and emails. However, the bureau reports that many were deemed ineligible or chose forbearance because they could not afford their payments.
For years, Navient worked to get the case dismissed, but after its new chief executive, David Yowan, took over in May 2023, it was determined that the student loan service was open to a settlement.
“This agreement puts these decade-old issues behind us,” said Navient spokesperson Paul Hartwick. “While we do not agree with the CFPB’s allegations, this resolution … is an important positive milestone in our transformation of the company.”
In a May 2024 report led by the Education Data Initiative, statistics revealed that four years after graduation, Black students owe an average of 188% more than white student loan borrowers. Moreover, Black
students are more likely to struggle financially post-graduation, often making monthly payments of $260 to pay back their loans.According to the settlement, Navient will never return to federal student loan servicing and has agreed never to “purchase debt originated through the defunct Federal Family Education Loan program.”
Moreover, the student loan company must prove that borrowers are made aware of their right to enroll in affordable repayment plans should there be instances of them still servicing student loans from the previous bank-based federal program.
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