CFPB bans Navient from servicing federal student loans and orders the company to pay $120 million for widespread failures in student loan origination

Washington, DC – Today, the Consumer Financial Protection Bureau (CFPB) filed a motion seeking an injunction against student loan servicer Navient for years of default and violations of law. If the court grants the motion, the company would be permanently barred from servicing federal loans. Direct loans and would prohibit the company from taking out most loans under the Nationwide Family Education Loan Program . These bans would largely drive Navient out of a market where the company has, among other illegal actions, pushed numerous student loan borrowers into expensive repayment options. Navient also illegally deprived student loan borrowers of the opportunity to enroll in cheaper, income-driven repayment plans and forced them to pay much more than they should have. Under the terms of the order, Navient would have to pay a $20 million penalty and pay $100 million in restitution to harmed borrowers.

“For years, Navient's top executives have profited handsomely by exploiting students and taxpayers,” said CFPB Director Rohit Chopra. “By barring the notorious student loan giant from servicing federal student loans and ensuring the unwinding of these transactions, the CFPB will finally put an end to years of abuse.”

“I welcome the CFPB's efforts to deliver concrete relief for borrowers and prevent similar failures in the future,” said James Kvaal, U.S. Assistant Secretary of Education. “Today's action builds on the Biden-Harris administration's work to hold loan servicers accountable and protect borrowers, including more than 1 million borrowers who received debt relief by addressing prior failures to properly track progress toward debt relief, such as by addressing forbearance control damages.”

The CFPB's investigation of Navient sparked a series of efforts by state and federal agencies to investigate the deferral provisions and other failures in the income-driven repayment program. These efforts resulted in more than 50 billion US dollars Debt relief for more than 1 million borrowers who were wrongly placed on a payment deferral, as well as those whose payments were incorrectly calculated. Today's order complements actions already taken by the Department of Education and state attorneys general to provide redress to borrowers harmed by Navient.

Navient (NASDAQ: NAVI) is headquartered in Herndon, Virginia, and was formerly known as Sallie Mae. At the time of the CFPB's lawsuit in 2017, Navient was the largest student loan servicer in the United States. It serviced student loans of more than 12 million borrowers, including more than 6 million accounts under its contract with the Department of Education. In total, it serviced more than $300 billion in federal and private student loans. During the period covered by the CFPB's lawsuit, the company was led by CEO Jack Remondi. Remondi orchestrated Navient's launch out of Sallie Mae. Since Navient's launch, the company's performance has lagged others in the industry. Last year, Navient's board replaced Remondi and began to steer the company away from its sordid history.

The CFPB sued Navient for failing borrowers at every stage of repayment. The suit alleges that Navient steered borrowers who might have been eligible for income-driven repayment plans into forbearance instead. This practice was cheaper and easier for Navient, but disadvantageous to borrowers. By steering struggling borrowers into forbearance—where interest continues to accrue and is capitalized—Navient's illegal actions resulted in numerous borrowers paying additional interest.

Navient is a repeat offender with a long history of violations. Following a referral by the CFPB in 2014 Ministry of Justice and the Federal Deposit Insurance Company Navient and its predecessor Sallie Mae were ordered to pay nearly $100 million for illegally defrauding nearly 78,000 soldiers. In 2021 Ministry of Education Navient was ordered to repay more than $22 million in excessive fees. In 2022, 39 state attorneys general announced a Settlement of $1.85 billion with Navient over its usurious student loan offerings and loan forbearance practices.

In 2021, Navient Contract with the Department of Education to service direct loans was eventually terminated. Navient announced in early 2024 that it plans to transfer servicing of its remaining loans to another servicer. The CFPB's order would ensure that Navient can never harm federal student loan borrowers on a large scale by getting back into the business of directly servicing federal student loans or expanding its Federal Family Education Loan Program loan portfolio.

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 actions, the CFPB alleges that Navient harmed student loan borrowers by:

• Misleading borrowers about income-based repayment plans: Navient did not adequately inform borrowers enrolled in income-driven repayment plans of the requirement to reconfirm their enrollment annually. Borrowers were not properly informed that submitting an incorrect or incomplete application to reconfirm their enrollment could result in an increase in their monthly payments and a delay in loan termination.
• Failed payment processing: Many borrowers had multiple student loans with different interest rates and monthly payments. When borrowers made payments intended for multiple loans, Navient misallocated payments. Navient also misallocated payments to a specific loan. These errors resulted in late fees, interest charges, and negative credit reports.
• Impact on creditworthiness of disabled borrowers, including severely injured veterans: Navient reduced the credit scores of borrowers who received forgiveness of their federal student loans due to total and permanent disability.
• Deceiving borrowers about Navient’s co-signer release requirements: Navient assured private borrowers that they could seek release of their cosigners if they repaid their loans in a certain way. But Navient did not follow through on those assurances for some borrowers.
• Misleading borrowers about credit improvement and the consequences of rehabilitating government student loans: For federal student loan borrowers whose loans fell into default, Navient's collections department promised relief on their credit reports if they completed a rehabilitation program. Navient was unable to fully deliver on the promised relief.

Enforcement action

Under the Consumer Financial Protection Act, the CFPB has the authority to take action against institutions that violate consumer financial protection laws, including unfair, fraudulent, or abusive acts or practices.

If the court issues the CFPB's order, Navient will be barred from most federal student loan activities. Navient would then no longer be able to service federal direct loans and, with a few exceptions, would no longer be able to originate Federal Family Education Loan Program loans. Navient would also be prohibited from conducting customer-facing servicing activities for the Federal Family Education Loan Program. Provided Navient is the primary servicer for all remaining Federal Family Education Loan Program loans, the order requires Navient to take a number of steps to ensure that borrowers' rights are protected, including the right to enroll in more favorable repayment plans.

The order also requires Navient to:

• Pay consumers $100 million in compensation: Navient must pay $100 million in compensation to affected consumers.
• Pay a $20 million fine: Navient will contribute $20 million to the CFPB's Victim Assistance Fund.

Read the proposed arrangement.

Relief for borrowers

The CFPB will send checks to consumers who are eligible for compensation under the settlement. Consumers do not need to take any action to receive compensation and should be wary of scammers who may try to use the names and likenesses of CFPB employees to steal money or private information. The CFPB will never ask consumers to pay money to receive compensation, nor will we ask consumers for additional information before they can cash a compensation check we issue. Consumers can visit the CFPB website for general information about CFPB compensation checks and more information about how to avoid potential scams.

Since 2013, the CFPB has been monitoring the student loan market for risks to consumers. In addition to the enforcement action against Navient, the CFPB has taken a number of Supervisory activities on the deficiencies in the income-based repayment system, in cooperation with the Ministry of Education, state law enforcement agencies and banking regulators. This work has sloppy servicing of student loans that has prevented borrowers from making progress toward loan repayment under existing federal programs, including income-driven repayments. This work was instrumental in a 2022 announcement by the Department of Education to implement a solution to correct servicers' mistakes and help borrowers obtain or move closer to loan repayment.

Learn about the information and resources the CFPB provides for consumers considering a student loan, as well as for consumers with student loans.

Read consumer complaints about Navient.

Read consumer complaints about student loan servicing.

Consumers can file complaints about financial products and services, including student loans and student services, by visiting the CFPB website or calling (855) 411-CFPB (2372).

Employees who believe their company has violated federal financial consumer protection laws are encouraged to send their findings to [email protected]. For more information on reporting potential industry misconduct, visit the CFPB website.

The Consumer Financial Protection Bureau is a 21st century agency that implements and enforces federal consumer protection laws and ensures that markets for consumer financial products are fair, transparent, and competitive. For more information, visit www.consumerfinance.gov.