Navient Corporation reaches USD120M settlement in student lending failures
Date
9/15/2024 3:31:20 AM
(MENAFN) Navient Corporation, a prominent American student loan servicer, has agreed to a USD120 million settlement with the US Consumer financial Protection Bureau (CFPB) over its handling of student loan borrowers. The CFPB announced on Thursday that it has filed a proposed order against Navient, citing years of failures and violations in its servicing practices. If approved by the court, the order would impose a permanent ban on Navient's ability to service federal Direct Loans and restrict the company from servicing or acquiring most other loans. This would effectively remove Navient from a market where it has been found to have engaged in illegal practices, including steering borrowers into costly repayment options.
The CFPB's investigation revealed that Navient had unlawfully denied borrowers the chance to enroll in more affordable income-driven repayment plans, forcing them to pay significantly more than necessary. Under the terms of the proposed order, Navient is required to pay a USD20 million penalty and provide USD100 million in restitution to affected borrowers. This settlement is part of a broader effort to hold the company accountable for its mismanagement and to provide relief to those who were harmed by its practices.
In response to the settlement, Navient stated that it is no longer involved in servicing or purchasing federal student loans. The company clarified that, with approval from the Department of Education, it transferred its contract for servicing government student loans to a third-party provider in 2021. Furthermore, Navient has reached an agreement to outsource the servicing of its legacy FFELP (Federal Family Education Loan Program) student loan portfolios, with this transition beginning on July 1, 2024. Navient assured that it will continue to oversee its third-party servicer to ensure compliance with all operational terms outlined in the agreement.
The settlement with the CFPB marks a significant development in the ongoing scrutiny of student loan servicing practices. It underscores the importance of regulatory oversight in protecting borrowers from predatory practices and ensuring that servicers adhere to legal and ethical standards in managing student loans.
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