Navient to Pay $120 Million in Settlement Over Student Loan Mismanagement

Navient Corp has agreed to a $120 million settlement to resolve a lawsuit filed by the Consumer Financial Protection Bureau (CFPB). The case, which dates back to 2017, accused Navient of steering borrowers into more expensive repayment options and mishandling their loans. The settlement brings some closure for affected borrowers, as Navient will also face changes in how it operates within the student loan industry.

Navient Settles Lawsuit Over Misleading Loan Practices

The CFPB lawsuit claimed that Navient led hundreds of thousands of student loan borrowers into costly forbearance programs, which allowed interest to pile up, rather than suggesting more affordable income-driven repayment plans. Borrowers often ended up paying much more than they needed to due to lack of proper guidance. 

On top of that, Navient was accused of making errors in how they applied payments to loans, which created further financial strain for customers.

As part of the settlement, Navient will pay $100 million directly to affected borrowers and a $20 million fine. CFPB Director Rohit Chopra called out Navient’s top executives for profiting while borrowers suffered. 

With this settlement, Navient will no longer be allowed to handle federal student loans, which marks a major shift in how the company operates.

Navient Banned From Federal Student Loan Servicing

Beyond the financial penalties, Navient is now officially barred from buying or managing federal student loans. By July 2024, all government contracts and existing federal student loans under Navient’s control will be transferred to other companies. This settlement brings an end to Navient’s involvement with federal student loans, a major development in the student loan servicing landscape.

This settlement also follows a 2021 lawsuit from investors accusing Navient of inflating stock prices and misleading shareholders. The lawsuit claims these actions caused a sharp drop in stock value, which added to Navient’s list of legal battles.

More Legal Troubles for Navient Despite Settlement

Even with this large settlement behind them, Navient’s legal issues aren’t over. In August, a borrower in Florida filed a class action lawsuit accusing the company of harassment. The borrower, Christina L. Strickland, claimed that Navient repeatedly called her at work and left robocall messages, even after she asked them to stop. This new class action suit brings more attention to Navient’s practices, adding another layer of legal pressure.

Have you or someone you know been affected by Navient's student loan servicing practices? Share your thoughts and experiences in the comments below.