Navient, a major student loan servicer, has reached a settlement with the Consumer Financial Protection Bureau (CFPB) to resolve government claims of abusive practices. As part of the settlement, the company has agreed to pay $120 million.
The government would get $20 million while $100 million would go to former Navient customers.
The CFPB sued Navient seven years ago, charging the company misled borrowers, resulting in unnecessary extra payments. For example, the CFPB charged Navient steered its borrowers into forbearance programs, resulting in higher-than-normal interest charges.
If accepted by the court, the settlement would bar Navient from servicing federal Direct Loans and would forbid the company from directly servicing or acquiring most loans under the Federal Family Education Loan Program.
“For years, Navient’s top executives profited handsomely by exploiting students and taxpayers,” said CFPB Director Rohit Chopra. “By banning the notorious student loan giant from federal student loan servicing and ensuring the winddown of these operations, the CFPB will finally put an end to the years of abuse.”
Frustrating experience
Some student loan borrowers have expressed frustration in dealing with Navient. Ronald, of Hondo, Tex., tells us he dealt with Navient for 24 years.
“For 24 years, I would have to fight just to get my IBR form accepted,” Ronald wrote in a ConsumerAffairs review. “I would literally fax, e-mail and snail mail it weekly for over a month before it was applied to my account by which time they had reported my as delinquent on payments, which were more than I made a month, to the credit agencies.”
Ronald said It was not until he got his loan transferred to AidVantage that he could manage his loan properly.
The CFPB’s investigation of Navient kicked off a series of efforts by state and federal agencies to examine forbearance steering and other breakdowns in the income-driven repayment program.
CFPB said those efforts have resulted in more than $50 billion in debt relief for more than 1 million borrowers who were wrongly steered into forbearance, as well as those who had payments miscounted.
Today’s order complements actions already taken by the Department of Education and state attorneys general to provide redress to borrowers harmed by Navient, the agency said.