Navient has agreed to pay $120 million as part of a settlement agreement reached with a federal regulator—most of which is expected to go to impacted student loan borrowers.
If approved by the court, the agreement will settle a 2017 lawsuit, in which the U.S. Consumer Financial Protection Bureau (CFPB) accused Navient of misleading student loan borrowers and not properly processing payments. Navient, formerly part of Sallie Mae, used to be one of the biggest servicers of student loans in the country. But, after Navient became embroiled in several legal and enforcement actions, the company’s contract with the government came to an end in 2021.
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The new agreement, filed in court on Thursday, stipulates that the CFPB would permanently ban Navient from directly servicing federal student loans. Of the $120 million Navient would have to pay, $100 million would be paid out to impacted borrowers, and $20 million would go to the bureau as a fine.
“For years, Navient’s top executives profited handsomely by exploiting students and taxpayers,” CFPB Director Rohit Chopra said in a press release Thursday. “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.”
While the CFPB hasn’t yet calculated exactly how many consumers would receive compensation as part of the settlement or how much each individual would receive, the bureau tells TIME that hundreds of thousands of borrowers could receive payments. Borrowers don’t need to take any action to receive their payment; eligible borrowers would receive a check from the bureau or its contractor in the mail, according to the CFPB.
The process of identifying borrowers who are eligible for payments as part of the settlement will take several months, according to the CFPB.
Navient agreed to Thursday’s settlement without admitting any wrongdoing, saying in a press release that the agreement “puts these decade-old issues behind us.”
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