Student loan provider Navient has agreed to pay $120 million in penalties and refunds to settle a dispute with the Consumer Financial Protection Bureau over what regulators describe as the company’s “wide-ranging student lending failures.”
As part of the settlement, Navient will also be barred from servicing federal student loans, which will put an end to the company’s “years of abuse of students in the federal student loan program,” the CFPB said in a news release.
Federal regulators accuse Navient of illegally steering borrowers into costly repayment options and depriving them of opportunities to enroll in more affordable income-driven repayment plans.
The company, which was formerly part of Sallie Mae, was sued by the federal government in 2017 for allegedly misleading student borrowers and forcing them to pay much more than what they should have.
Navient — the nation’s largest student loan servicer at the time of the lawsuit — failed borrowers “at every stage of repayment,” the suit alleged.
As part of the settlement announced Thursday, $20 million will go to the CFPB’s civil penalty fund, while $100 million will be used to make payments to “harmed borrowers,” who will receive checks in the mail.
“I applaud the CFPB for obtaining concrete relief for borrowers and deterring similar failures in the future,” U.S. Under Secretary of Education James Kvaal said in a statement.
Besides offering relief to affected borrowers, the move will also hold loan service providers accountable, officials said.
On Thursday, Navient confirmed it had reached an agreement with the bureau.
“While we do not agree with the CFPB’s allegations, this resolution is consistent with our go-forward activities and is an important positive milestone in our transformation of the company,” a spokesperson said in a statement.
The CFPB vehemently disagrees, calling the company a “repeat offender with a long history of regulatory violations.”
