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Student loan giant Navient has reached a $120 million settlement with the Consumer Financial Protection Bureau over its practices with student loan borrowers, the company tells CNBC.
The CFPB sued Navient in 2017 for allegedly misleading borrowers and providing them with bad information, causing many to pay more than they needed to.
The consumer watchdog agency also accused Navient of steering student loan borrowers into expensive forbearances, causing many to pay steep interest charges.
Additionally, the CFPB alleged that Navient miscalculated borrowers’ payments and tarnished the credit reports of disabled borrowers, including severely injured veterans.
At the time, the lender was the largest student loan servicer in the U.S., managing the accounts of more than 12 million people.
Navient stopped servicing the government’s federal student loans in 2021. The lender has also agreed not to reenter servicing of federal student loans.
Navient still owns the private student loans for around 3.7 million people, although another servicer, Mohela, will soon service those accounts.
The company’s shares were up more than 5% in late-morning trading Thursday.
As part of the settlement, $100 million will be used to make payments to impacted customers, as determined by the CFPB, Navient said.
The remaining $20 million will go to the CFPB’s civil penalty fund.
Rohit Chopra, director of the Consumer Financial Protection Bureau (CFPB), speaks during a hearing in Washington, DC, US, on Thursday, May 9, 2024.
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“For years, Navient’s top executives profited handsomely by exploiting students and taxpayers,” CFPB Director Rohit Chopra said in a statement.
“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,” said Chopra.
Navient framed the agreement as a positive step for the company.
“This agreement puts these decade-old issues behind us,” a Navient spokesperson said in a statement to CNBC. “While we do not agree with the CFPB’s allegations, this resolution is consistent with our go-forward activities and is an important positive milestone in our transformation of the company.”