The CFPB announced last week that borrowers affected by Navient’s misconduct will soon begin receiving payments.
In September 2024, the Consumer Financial Protection Bureau (CFPB) announced that it was permanently banning Navient from servicing most federal student loans due to illegal practices that harmed borrowers. Navient was also ordered to pay $100 million in relief to affected borrowers and a $20 million civil penalty to the CFPB.
If Navient was the servicer of your federal student loans in the past, you may soon receive a payment. This news highlights the CFPB’s important role in delivering compensation and critical relief for people harmed by illegal business practices. For more information about the settlement, visit the CFPB’s page on the Navient lawsuit.
What do borrowers have to do to receive payment from the settlement?
The CFPB will mail checks to borrowers who are eligible for payment under the settlement, and borrowers do not need to do anything. The CFPB has provided information about these payments, including instructions for borrowers who believe they are entitled to a payment.
If you have questions about the Navient settlement, you can reach out to the administrator of the CFPB settlement, Rust Consulting, via the following methods:
- Call:1-800-711-8418 (toll-free)
- Email: navient_info@rustcfpbconsumerprotection.org
- Write: CFPB v Navient
P.O. Box 2561
Faribault, MN 55021-9561
What was the CFPB lawsuit against Navient about?
The CFPB’s lawsuit was filed in 2017 and accused Navient of engaging in harmful practices. Navient, formerly known as Sallie Mae, was once the nation’s largest student loan servicer, servicing over 12 million borrowers’ accounts. The CFPB alleged that Navient engaged in unfair and abusive practices, violating the Consumer Financial Protection Act of 2010 (CFPA) and the Fair Credit Reporting Act (FCRA).
The lawsuit alleged that Navient engaged in the following misconduct:
- Forbearance steering – Navient steered borrowers facing long-term financial hardships into costly forbearances, which increased their overall debt burden, rather than informing them about income-driven repayment plans (IDR), which could have lowered their monthly payments, in some cases, to $0.
- Misleading borrowers about IDR recertification – Navient did not adequately inform IDR-enrolled borrowers of the requirement to recertify annually and did not inform them of the consequences of submitting an incomplete recertification application, which led to an increase in borrowers’ monthly payments and delayed loan cancellation.
- Misapplication of payments – Navient misallocated payments intended to cover multiple loans. This resulted in borrowers incurring late fees, accruing interest, and drops in credit scores.
- Reporting false negative information about disabled borrowers – Navient misreported information to the credit reporting agencies about borrowers who were totally and permanently disabled. Navient made it appear that these borrowers had defaulted on their loans when, in fact, their loans had been discharged due to their disability.
- Deceiving borrowers about cosigner release – Navient told private loan borrowers they could apply for cosigner release if they paid down their loans in a certain way; however, after the borrower paid down their loans as instructed, Navient denied or delayed the release.
- Misleading borrowers about credit score improvements and effects of loan rehabilitation – Navient, through Pioneer Credit Recovery (a debt collection company owned by Navient), wrongly told borrowers in default that records reflecting late payments and delinquencies prior to default would be deleted from their credit reports when those records could not be deleted after a loan is rehabilitated.
As a result of the lawsuit, Navient voluntarily stopped servicing most federal student loans in 2021, and the CFPB ban makes this change permanent.
The CFPB lawsuit and settlement follow a previous settlement in which 39 state attorneys general required Navient to pay $1.85 billion in relief for unfair and deceptive practices.
What does the CFPB Navient ban mean for borrowers?
Navient is banned from servicing Direct Loans.
The settlement agreement with Navient permanently bans Navient from servicing Direct Loans. Direct Loans are federal student loans made directly to borrowers by the Department of Education. These loans are owned by the Department, but the government relies on private companies like Navient to perform servicing functions, including sending bills, collecting payments, and advising borrowers about their payment options.
Navient is banned from servicing FFEL Loans.
Although new FFEL loans stopped being made in 2010, private companies like Navient still own, manage, and service a large portfolio of old FFEL loans. In February 2024, Navient transferred servicing of its entire FFEL loan portfolio, consisting of almost 3 million borrowers, to MOHELA. The CFPB ban ensures that Navient will not acquire any new ownership interest or service FFEL loans again in the future.
