Sept 12 (Askume) – U.S. regulators barred Navient (NAVI.O) from servicing federal student loans on Thursday, forcing the company once known as Sallie Mae out of that market, and ordered it to pay $120 million over several years to students.
The Consumer Financial Protection Bureau said the ban would prevent Navient from offering federal direct loans and from directly making or receiving most loans under the federal home education loan program.
CFPB Director Rohit Chopra told reporters that his agency was “ceasing” Navient, saying the company was “harming millions of borrowers across the country.”
The CFPB accused Navient of pushing borrowers to defer payments even when they qualified for affordable income-based repayment plans, causing them to pay more interest because it was cheaper and easier.
It also accused Navient of making errors in processing payments and misleading borrowers about their rights.
The award includes $100 million in restitution and a $20 million civil penalty.
Herndon, Virginia-based Navient said in a statement that it disagrees with the CFPB’s allegations but that the settlement “puts these decades-old issues behind us” and “is a positive step in our company’s transformation.”
In January 2022, Navient reached a $1.85 billion settlement with 38 U.S. states and Washington, D.C., to resolve allegations that it offered predatory loans that borrowers struggled to repay.
Navient said it will no longer originate or purchase federal student loans and will transfer its government loan servicing contracts to third parties in 2021 and begin outsourcing the servicing of federally subsidized private loans in July.
Navient shares rose 6.2% to $15.57 in afternoon trading.
Chopra told Askume in an interview that while Navient is taking steps to disassociate itself from its past, Thursday’s enforcement action ensures the company will not be involved in the business.
“They need to change their business because they will never be able to enter the student loan industry again,” he said.
The settlement resolves a lawsuit filed by the CFPB in Scranton, Pennsylvania, in January 2017 and requires a judge’s approval.
The CFPB said that when the lawsuit began, Navient was the largest student loan servicer in the United States, processing more than $300 billion in federal and private loans for more than 12 million borrowers.
