If you don’t know it yet, yes Navient used to be one of the biggest student loan managers in the USA, and it was created as a result of the split of a large part of Sallie Mae, one of the known loan companies in the country, which Navient was once part of. It provided services to over 12 million borrowers, responsible for more than just partners of federal and private loans, with the amount of these loans being close to $300 billion, you know?
Though, soon after the merger, a lot of problems arose. The Consumer Financial Protection Bureau (CFPB) tried to conduct an investigation, where it was found that Navient didn’t act fairly against those who borrowed the money and then the Bar Association of the State of New York filed a lawsuit against it, but recently there was a settlement that came through this lawsuit, and today, we will be talking about just that. Here we go.
Overview of the CFPB Lawsuit
Way back in 2017, a lawsuit was slapped on Navient, the company with several harmful practices by the CFPB, you know? These were things like: Misinformation regarding payments, mishandling of loan payments, and pushing borrowers into more costly repayment plans were Navient’s charges as stated in the lawsuit. This complicated loan repayment and increased the overall payments made by borrowers by an unneeded amount, you know? Navient ultimately, in response to the growing pressure to solve the problems of borrowers and the education sector, in a landmark decision agreed to end the handling of federal student loans in 2021. The lawsuit needed a settlement by 2024 and hence Navient had to go through the important tunnel of paying a big price for its wrongful deeds, and that’s precisely what it did.
Settlement Details
Just so you know though, as per the timeline, the CFPB and Navient came to a deal of a whopping $120 million. And yes, the total amount was split into two according to two measures: $100 million will be paid to the borrowers who were affected by the harsh behavior of Navient, you know? The resolution will be automatically made by the CFPB for which the eligible borrowers will neither have to fill out any extra forms nor call in to ask for it.
That’s not it though, Navient paid a fine of $20 million also to the CFPB’s victims’ relief fund. The most important thing to mention is that Navient has been disqualified from servicing federal student loans for a long time meaning that they can no longer carry out the majority of the federal student loans that were acquired or managed.
Broader Impact of the Settlement
It’s worth noting that the settlement has been significant for quite a few reasons. Primarily, it is Navient that is now accountable and borrowers will no longer be subjected to any misleading practices, you know? This is a big deal as the eligible borrowers will not have to take any action to get their compensation, it will be done automatically by the CFPB through the issuance of checks.
And with this case or lawsuit, now it is clear to other lending firms that they should operate in a proper manner or else they will be severely penalized. By pinpointing these misdeeds, it is the operators of the loans who will refrain from any unfair dealings, yes, customers like you and me.
On another level, the CFPB, as well as a mixture of federal and state agencies, together have been working on tackling wider problems of the student loan system. This effort that has never come to a standstill has already given rise to debt relief of more than $50 billion for borrowers who were negatively affected by numerous loan servicers.
