WASHINGTON — The Consumer Financial Protection Bureau (CFPB) has issued a proposed order against the student loan servicer Navient for what it alleges have been “years of failures and lawbreaking.”
Herndon, Va.-based Navient, which was formerly known as Sallie Mae, has been ordered to pay a $20 million penalty and provide $100 million in redress for harmed borrowers.
According to the CFPB, if entered by the court the proposed order would permanently ban the company from servicing federal Direct Loans and would forbid the company from directly servicing or acquiring most loans under the Federal Family Education Loan Program.
“These bans would largely remove Navient from a market where it, among other illegal actions, steered numerous student loan borrowers into costly repayment options,” the CFPB said in a statement. “Navient also illegally deprived student borrowers of opportunities to enroll in more affordable income-driven repayment plans and forced them to pay much more than they should have.”
The Investigation
According to the CFPB, its investigation of Navient kicked off a series of efforts by state and federal agencies to examine forbearance steering and other breakdowns in the income-driven repayment program.
“Those efforts have resulted in more than $50 billion in debt relief for more than one-million borrowers who were wrongly steered into forbearance, as well as those who had payments miscounted,” the Bureau said, adding that its order complements actions already taken by the Department of Education and state attorneys general to provide redress to borrowers harmed by Navient.
Was Largest Lender
The CFPB noted that at the time of its lawsuit in 2017, Navient was the largest student loan servicer in the U.S., servicing student loans of more than 12-million borrowers, including more than six-million accounts under its contract with the Department of Education. Altogether, it serviced more than $300 billion in federal and private student loans.
“During the period covering the CFPB’s lawsuit, the company was led by CEO Jack Remondi. Remondi orchestrated the launch of Navient out of Sallie Mae,” the CFPB said. “Since the launch of Navient, the company’s performance has lagged others in the industry. Last year, Navient’s board of directors replaced Remondi and began to transition the company away from its sordid history.”
‘Failing Borrowers at Every Step’
The CFPB said it sued Navient for “failing borrowers at every stage of repayment.”
The lawsuit alleges that Navient steered borrowers who may have qualified for income-driven repayment plans into forbearance instead.
“This practice was cheaper and simpler for Navient, but detrimental to borrowers,” the CFPB said. “By steering struggling borrowers into forbearance – where interest continues to accrue and capitalize – Navient’s illegal actions led numerous borrowers to pay additional interest charges.”
Repeat Offender
In addition, the CFPB called Navient a “repeat offender with a long history of regulatory violations,” including:
- A 2014 ruling that ordered Navient and its predecessor, Sallie Mae, to pay almost $100 million for illegally overcharging nearly 78,000 servicemembers
- In 2021, the Department of Education ordered Navient to return more than $22 million in overcharges
- In 2022, 39 state attorneys general announced a $1.85 billion settlement with Navient for originating predatory student loans in addition to its forbearance steering practices
In 2021, the CFPB said Navient’s contract with the Department of Education to service Direct Loans ended and the company in early 2024 said it intended to transfer the servicing of its remaining loans to another servicer.
“The CFPB’s order would ensure that Navient can never harm federal student loan borrowers at scale by getting back into the business of directly servicing federal student loans or growing its Federal Family Education Loan Program loan portfolio,” the CFPB said.
For specifics around the violations alleged by the CFPB and other details in the order, go here.
$120 Million in Fines, Redress
If entered by the court, the CFPB’s order bans Navient from most federal student loan activities. Navient would no longer be able to service federal Direct Loans and, with certain limited exceptions, no longer be able to acquire Federal Family Education Loan Program loans. Navient would also be banned from conducting consumer-facing servicing activities for the Federal Family Education Loan Program, the CFPB said.
The order also requires Navient to:
- Pay $100 million redress to consumers: Navient will be required to provide $100 million in redress for affected consumers.
- Pay a $20 million penalty: Navient will pay $20 million into the CFPB’s victims relief fund.