On September 12, 2024, the CFPB filed a proposed order against the student loan servicer Navient for its multiple failures and illegal actions in its student lending services. 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.
Navient, formerly known as Sallie Mae, was the largest student loan servicer in the United States in 2017. The CFPB 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.
According to the CFPB, Navient is a repeat offender. In 2014, the DOJ and the FDIC ordered Navient and its predecessor, Sallie Mae, to pay almost $100 million for illegally overcharging 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.
The CFPB found that Navient violated the Consumer Financial Protection Act, the Fair Credit Reporting Act, and the Fair Debt Collection Practices Act. In addition to its unlawful steering activities, the CFPB alleges Navient harmed student loan borrowers by:
Misleading borrowers about income-driven repayment plan;
Botching payment processing;
Harming the credit of disabled borrowers, including severely injured veterans;
Deceiving borrowers about Navient’s requirements for cosigner release; and
Misleading borrowers about improving credit scores and the consequences of federal student loan rehabilitation.
The CFPB’s order requires Navient to:
Pay $100 million in redress for affected consumers; and
Pay $20 million into the CFPB’s victims relief fund.
The CFPB’s press release can be found here.
The proposed order can be found here.