Student Loan Borrowers to Get Relief Checks After $120 Million Navient Settlement

The federal government is ordering student loan servicer Navient to pay a hefty fine aimed at redressing exploited borrowers.

The Consumer Financial Protection Bureau (CFPB) filed a proposed order Thursday against Navient, fining the financial firm $120 million and recommending it be permanently banned from servicing federal student loans. Part of that money is earmarked for direct compensation to student loan borrowers who the consumer protection agency says were harmed.

“For years, Navient’s top executives profited handsomely by exploiting students and taxpayers,” said CFPB Director Rohit Chopra in an announcement. The proposed order is the outcome of a protracted legal battle between the CFPB and Navient, spanning three presidential administrations.

In 2017, the CFPB’s lawsuit alleged that Navient — which was the largest student loan servicer in the nation at the time — steered borrowers into more expensive repayment plans and interest-accruing forbearance periods, provided bad information to borrowers, processed borrowers’ payments incorrectly and did not adequately address formal complaints lodged by borrowers to the CFPB. Navient disputes these allegations but has agreed to settle the matter.

“This is the end of one of the longest-running government enforcement actions against a major financial firm in U.S. history,” tweeted Mike Pierce, head of advocacy group Student Borrower Protection Center, or SPBC.

He later added in a SPBC statement that the federal lawsuit uncovered evidence that helped inform President Joe Biden's student loan payment recount program and contributed to the forgiveness of over $50 billion of federal student loans held by more than a million borrowers.

Navient has racked up over 41,000 formal complaints in the CFPB database — far outpacing all general student loan complaints, which total about 23,000.

In 2021, Navient’s federal student loan servicing contract with the Department of Education expired. Since then, the company has sought to distance itself from student loan servicing altogether. Earlier this year, the firm told investors that it would offload legacy student loans in its portfolio — an estimated $8 billion as of 2023 — to another servicer, MOHELA.

Meanwhile, Navient has been shifting its focus toward other ventures, including student loan refinancing as well as outsourcing and consulting services for businesses, while new private loans are being handled by its subsidiary Earnest.

Though Navient agreed to the order, it’s not technically finalized yet. Unlike recent enforcement actions from the CFPB, the Navient order is subject to approval by a federal court in Pennsylvania, where the order was filed on Thursday.

“This agreement puts these decade-old issues behind us,” Navient said in response to the filing, noting that the firm does not agree with the allegations and that it no longer services or purchases federal student loans.

Borrowers could get direct relief by check

Borrowers potentially eligible for relief include those whose loans were serviced by Navient. Exact estimates have not been released yet, though officials told reporters on a press call that hundreds of thousands of borrowers are expected to receive checks.

Of the $120 million in fines ordered by the CFPB, about $100 million is intended to directly go to borrowers who were affected by Navient’s alleged deceptive practices. The other $20 million will go to a more general victim’s relief fund, which pays out to consumers who were harmed by other companies that were penalized by the CFPB.

The CFPB says that checks will be mailed out automatically in most cases. Sometimes more information is needed to determine eligibility for relief, and the agency says it may send out claim forms by mail or email. However, the agency will never ask for payment to receive relief.

If (or when) the order is entered by the federal court in Pennsylvania, Navient will have 10 days to pay the CFPB fines in full, and the reimbursement process will begin from there. Borrowers can check from a list of active CFPB relief measures to verify the disbursement process and timeline or call (855) 411-2372 directly to confirm that the check — or a potential request for more information — is legitimate.

Unlike class action lawsuits, receiving disbursements from the CFPB’s victim’s relief fund does not bar recipients from pursuing further legal action against the company.

More from Money:

The Best Colleges in America Right Now

Student Loan Forgiveness Is Blocked Again: 5 Key Updates Amid the Legal Chaos

Navient Is Quietly Forgiving Private Student Loans Amid Pressure From Lawmakers