Navient Agrees to $120 Million Settlement: Debt Relief for Students

Navient, once one of the largest service providers for federal student loans in the U.S., has agreed to pay $120 million to settle allegations that it prevented students from accessing affordable repayment plans to which they were legally entitled. This settlement was announced jointly with the Consumer Financial Protection Bureau (CFPB). In addition to the financial settlement, the agreement prohibits Navient from managing federal student loans and acquiring older private loans that are part of the federal student loan program. This marks a clear break from the past, after Navient largely exited the federal student loan business in 2021. CFPB Director Rohit Chopra expressed satisfaction during a press conference: "We are closing the chapter on Navient, one of the worst actors in the student loan servicing market." The settlement ends a lawsuit filed in 2017, in which the CFPB claimed that Navient had steered students away from income-driven repayment plans and into forbearance. Forbearance pauses loan payments but allows interest to accrue and does not build credit towards loan forgiveness—unlike income-driven plans. For affected borrowers, this means financial relief: they will receive payments directly from the CFPB without any action required on their part. However, the agency warns of potential scam attempts and emphasizes that affected borrowers should remain vigilant. The CFPB estimates that hundreds of thousands of consumers will benefit from the relief measures. Additionally, the CFPB’s and state attorneys general’s allegations have prompted the Department of Education to take action as well. Following these developments, the Biden Administration has already canceled over $50 billion in debt for more than one million borrowers. Navient had previously, in 2022, agreed to a settlement with 39 state attorneys general, canceling $1.7 billion in private student loans that were allegedly subject to unfair practices. Paul Hartwick, a spokesperson for Navient, described the settlement as "an important positive milestone," emphasizing that while the company does not agree with the allegations, it wishes to put these "decades-old problems" behind it. Navient has since transferred the management of its privately held loans to the Higher Education Loan Authority of the State of Missouri (MOHELA), but remains responsible for overseeing third-party compliance with contractual agreements.