Today, the Consumer Financial Protection Bureau (CFPB) filed a proposed order against the student loan servicer Navient for its years of failures and lawbreaking. 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. 

These bans would largely remove Navient from a market where it, among other illegal actions, steered numerous student loan borrowers into costly repayment options. Navient also illegally deprived student borrowers of opportunities to enroll in more affordable 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 provide $100 million in redress for harmed borrowers.

“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.”

“I applaud the CFPB for obtaining concrete relief for borrowers and deterring similar failures in the future,” said U.S. Under Secretary of Education James Kvaal. “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 have received debt relief by fixing past failures to properly track progress toward forgiveness, such as correcting harms from forbearance steering.”

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. 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.

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. Altogether, it serviced more than $300 billion in federal and private student loans. 

During the period covering the CFPB’s lawsuit, the company was led by CEO Jack Remondi. Remondi orchestrated the launch of Navient out of Sallie Mae. Since the launch of Navient, the company’s performance has lagged others in the industry. Last year, Navient’s board of directors replaced Remondi and began to transition the company away from its sordid history.

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. This practice was cheaper and simpler for Navient, but detrimental to borrowers. By steering struggling borrowers into forbearance – where interest continues to accrue and capitalize – Navient’s illegal actions led numerous borrowers to pay additional interest charges.

Navient is a repeat offender with a long history of regulatory violations. After a referral from the CFPB, in 2014, the Department of Justice  and the Federal Deposit Insurance Corporation  ordered Navient and its predecessor, Sallie Mae, to pay almost $100 million for illegally overcharging nearly 78,000 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.

In 2021, Navient’s contract  with the Department of Education to service Direct Loans finally ended. Navient announced in early 2024 that it intended to transfer the servicing of its remaining loans to another servicer. The CFPB’s order would ensure that Navient can never harm federal student loan borrowers at scale by getting back into the business of directly servicing federal student loans or growing 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 activities, the CFPB alleges Navient harmed student loan borrowers by:

• Misleading borrowers about income-driven repayment plans: Navient failed to adequately notify borrowers who enrolled in income-driven repayment plans about the requirement to annually recertify their enrollment. Borrowers were not properly notified that submitting an incorrect or incomplete application to recertify their enrollment could lead to an increase in their monthly payments and delay loan cancellation.
• Botching payment processing: Many borrowers had multiple student loans with varying interest rates and monthly payments. When borrowers made payments meant to cover multiple loans, Navient misallocated payments. Navient also misapplied payments made to a particular loan. These errors resulted in late fees, interest accrual, and negative credit reporting.
• Harming the credit of disabled borrowers, including severely injured veterans: Navient tarnished the credit reports of borrowers who had received a discharge on their federal student loans due to a total and permanent disability.
• Deceiving borrowers about Navient’s requirements for cosigner release: Navient made representations to private loan borrowers that if they paid down their loans in a certain way, they could apply for their cosigners to be released. But Navient did not honor those representations for some borrowers.
• Misleading borrowers about improving credit scores and the consequences of federal student loan rehabilitation: For federal student loan borrowers whose loans went into default, Navient’s debt collection arm promised credit reporting relief to borrowers if they completed a rehabilitation program. Navient failed to deliver on all of the promised relief.

Enforcement Action

Under the Consumer Financial Protection Act, the CFPB has the authority to take action against institutions violating consumer financial protection laws, including engaging in unfair, deceptive, or abusive acts or practices.

If entered by the court, the CFPB’s order bans Navient from most federal student loan activities. Navient would no longer be able to service federal Direct Loans and, with certain limited exceptions, no longer be able to acquire Federal Family Education Loan Program loans. 

Navient would also be banned from conducting consumer-facing servicing activities for the Federal Family Education Loan Program. Where Navient is the master servicer for any remaining Federal Family Education Loan Program loans, the order requires Navient to take a series of steps to help ensure borrowers’ rights are protected, including the right to enroll in more affordable repayment plans.

The order also requires Navient to:

• Pay $100 million redress to consumers: Navient will be required to provide $100 million in redress for affected consumers.
• Pay a $20 million penalty: Navient will pay $20 million into the CFPB’s victims relief fund.
  Read the proposed order.

Borrower Relief

The CFPB will mail checks to consumers who are eligible to obtain redress under the settlement. Consumers do not need to do anything to obtain redress and should be aware of scammers that may try to use CFPB employees’ names and imagery to try to steal money or private information. 

The CFPB will never require consumers to pay money to obtain redress, nor will we ask for additional information before consumers can cash a redress check that we’ve issued. On the CFPB’s webpage, consumers can obtain general information about CFPB redress checks and more information about how to avoid potential scams.

Since 2013, the CFPB has supervised the student loan market for risks to consumers. In addition to the Navient enforcement action, the CFPB has engaged in a range of supervisory work  on the failures in the income-driven repayment system, in partnership with the Department of Education, state enforcement agencies, and banking regulators. 

This work has identified the shoddy student loan servicing  that has derailed borrowers from making progress toward loan cancellation under existing federal programs, including income-driven repayment. This work was instrumental to a 2022 announcement by the Department of Education to implement a fix to correct the failures of servicers and to help borrowers receive or move closer to loan cancellation.

• Learn more about the information and resources the CFPB has available for consumers considering student loans and for consumers with student loans.
• Read consumer complaints about Navient.
• Read consumer complaints about student loan servicing.

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

Employees who believe their company has violated federal consumer financial protection laws are encouraged to send information about what they know to whistleblower@cfpb.gov. To learn more about reporting potential industry misconduct, visit the CFPB’s website.