CFPB Takes Action Against Navient for Years of Student Loan Mismanagement and Violations

Order would put an end to Navient’s years of abuse of students and taxpayers in the federal student loan program

Today, the Consumer Financial Protection Bureau (CFPB) announced a proposed order against Navient, a major student loan servicer, for its long history of mismanagement and illegal practices. If the court approves the order, Navient will be permanently banned from servicing federal Direct Loans and prohibited from directly servicing or acquiring most loans under the Federal Family Education Loan Program (FFELP). These actions would largely remove Navient from the federal student loan market, where it has been accused of steering borrowers into costly repayment options and depriving them of more affordable, income-driven repayment plans. As part of the proposed order, Navient would be required to pay a $20 million penalty and provide $100 million in restitution to harmed borrowers.

“For years, Navient’s top executives profited by exploiting students and taxpayers,” said CFPB Director Rohit Chopra. “By removing this notorious student loan giant from federal student loan servicing, the CFPB will put an end to years of abuse.”

U.S. Under Secretary of Education James Kvaal also praised the CFPB’s action, noting that it builds on the Biden-Harris Administration’s efforts to hold loan servicers accountable and protect borrowers. This includes providing debt relief to over 1 million borrowers who were previously denied proper loan forgiveness due to servicer errors, such as those stemming from forbearance steering.

The CFPB’s investigation into Navient is part of a broader effort by federal and state agencies to address widespread issues in the income-driven repayment system. These efforts have resulted in over $50 billion in debt relief for borrowers who were wrongfully steered into forbearance or had their payments miscounted. The CFPB’s order complements ongoing actions by the Department of Education and state attorneys general to provide relief to those affected by Navient’s practices.

Navient, headquartered in Herndon, Virginia, was formerly known as Sallie Mae and was the largest student loan servicer in the U.S. at the time of the CFPB’s lawsuit in 2017. The company serviced loans for over 12 million borrowers, including more than 6 million under its contract with the Department of Education, managing over $300 billion in federal and private student loans. The CFPB’s lawsuit accused Navient of steering borrowers away from income-driven repayment plans and into forbearance, where interest continued to accrue, leading to higher costs for borrowers.

Navient has a long history of regulatory violations. In 2014, following a referral from the CFPB, the Department of Justice and the Federal Deposit Insurance Corporation ordered Navient and its predecessor, Sallie Mae, to pay nearly $100 million for overcharging servicemembers. In 2021, the Department of Education ordered Navient to return over $22 million in overcharges. Additionally, in 2022, 39 state attorneys general reached a $1.85 billion settlement with Navient for originating predatory student loans and engaging in forbearance steering practices.

Navient’s contract with the Department of Education to service Direct Loans ended in 2021, and the company announced in early 2024 that it planned to transfer its remaining loans to another servicer. The CFPB’s order would ensure that Navient cannot re-enter the federal student loan servicing market or expand its FFELP loan portfolio, protecting borrowers from future harm.

The CFPB’s investigation revealed several unlawful practices by Navient, including:

• Misleading Borrowers About Income-Driven Repayment Plans: Navient failed to adequately inform borrowers about the need to annually recertify their enrollment in income-driven repayment plans, leading to higher payments and delayed loan cancellation.
• Botching Payment Processing: Navient misallocated and misapplied payments, resulting in late fees, interest accrual, and negative credit reporting.
• Harming Disabled Borrowers’ Credit: Navient damaged the credit reports of borrowers, including severely injured veterans, who had their federal loans discharged due to total and permanent disability.
• Deceiving Borrowers About Cosigner Release: Navient misled private loan borrowers about the requirements for cosigner release, failing to honor its promises.
• Misleading Borrowers About Credit Score Improvements: Navient falsely promised credit reporting relief to federal student loan borrowers in default who completed a rehabilitation program.

If approved, the CFPB’s order will not only ban Navient from most federal student loan activities but also require the company to take specific steps to protect borrowers’ rights, such as ensuring access to affordable repayment plans.

Under the order, Navient will also be required to:

• Provide $100 Million in Restitution: Navient must compensate affected borrowers with $100 million in redress.
• Pay a $20 Million Penalty: Navient will contribute $20 million to the CFPB’s victims relief fund.

Eligible borrowers will automatically receive redress from the CFPB, and there is no need for them to take any action. The CFPB warns consumers to be cautious of potential scammers who may attempt to exploit this situation.

Since 2013, the CFPB has actively monitored the student loan market for consumer risks. The Bureau’s enforcement action against Navient, along with its ongoing supervision of the income-driven repayment system, has been critical in addressing the failures of student loan servicers and helping borrowers move closer to loan cancellation.

For more information on student loans and consumer protection resources, or to submit a complaint about student loan servicing, visit the CFPB’s website or call (855) 411-CFPB (2372). Employees aware of potential violations of federal consumer protection laws are encouraged to report misconduct to the CFPB through its whistleblower program.

For additional details on the proposed order and to learn more about how to avoid scams related to redress payments, visit the CFPB’s official website.