A landmark legal victory bars Navient from federally servicing student loans and makes it pay back borrowers an estimated $100 million for various problematic practices over the years, according to this settlement orchestrated by the Consumer Financial Protection Bureau. The settlement with the consumer financial watchdog follows months-long litigation that has accused the company of mismanaging loans and deceiving borrowers in the process. In addition, it faces a $20 million penalty, which will be directed to the CFPB’s victims relief fund.
Charges brought under Navient’s practice to steer borrowers into forbearance rather than into income-driven repayment plans, which would have aided them more, increased interest burdens against the borrowers and also reflected the larger trend of behavior for which the CFPB had been heavily scrutinizing. This is a landmark moment in the transformation of the way regulators are overseeing the student loan servicing industry, and it is part of the broader effort to protect student borrowers.
These, and other legal battles in the past, have prompted Navient to exit the student loan market. Just last year, the student loan servicer settled allegations brought by state attorneys general by agreeing to pay $1.85 billion. Cases like these demonstrate that regulatory agencies, such as the CFPB, are increasingly exercising fair and transparent treatment in student loan servicing.
