Lawsuits, investigations, settlements, and controversies
In August 2015, the CFPB, which had been investigating the company for nearly two years, sent Navient a letter telling its executives that the agency's enforcement staff had found enough evidence to indicate the company violated consumer protection laws.[34]
On May 28, 2015, the United States Department of Justice announced that nearly 78,000 military service members would begin receiving $60 million in compensation for being charged excess interest on their student loans by Navient.[35] The company opted for this settlement to resolve the federal government's lawsuit alleging the company's violation of the rights of service members eligible for benefits and protections under the Service Members Civil Relief Act (SCRA).[36]
On March 14, 2016, Senator Elizabeth Warren gave a speech in Congress qualifying Navient's service and subsequent contract award by the Department of Education as "an outrageous fiasco".[37] Warren recommended "a total reform of student loan servicing to make sure that nothing as the Navient disaster ever happens again".[37][38]
In June 2016, stockholders filed a class action lawsuit against Navient. The plaintiffs included Chicago police officers and retired city employees in Providence, Rhode Island.[39]
On January 18, 2017, the CFPB, along with the Attorneys General of Illinois, Pennsylvania, and Washington, filed a complaint against Navient in the United States District Court for the Middle District of Pennsylvania alleging violations of the Fair Credit Reporting Act and Fair Debt Collection Act.[40] It alleged that Navient "systematically and illegally [failed] borrowers at every stage of repayment" with "abusive interest charges, hurting disabled military veterans by making inaccurate reports to credit companies about them and making repayments harder than necessary." According to the court filing, The company released a public statement[42] and fact sheet[43] denying the allegations and calling them politically motivated and harmful to borrowers. The lawsuit was settled in 2024, under a proposed order from the CFPB that barred Navient from servicing federal student loans and that required the company to pay $120 million in fines and compensation to borrowers.[3]
Since at least 2011, up to 2017, "tens of thousands" of complaints were filed against Navient.[41] In 2017, 6,708 federal complaints were filed about the company, in addition to 4,185 private complaints – more than any other student loan lender.
In 2018, it was revealed that Navient had attempted to collect loans from co-signers after a student's accidental death.[44]
Navient was also sued by the American Federation of Teachers (AFT) for allegedly failing to divert teachers into public forgiveness plans.[45]
Former Attorney General of Louisiana Charles C. Foti Jr. and the law firm of Kahn Swick & Foti announced that they had started investigating Navient. The investigation is focusing on whether Navient's officers and/or directors breached their fiduciary duties to Navient's shareholders or otherwise violated state or federal laws.[46]
In 2019, Navient's lending practices were the subject of an episode of Michael Lewis's "Against the Rules" podcast.[47]
In 2021, it was reported that the US Department of Education had ordered Navient to pay $22.3 million in a decades-old scandal involving Navient's former parent company, Sallie Mae. The company was accused of overcharging the US government.[48] In the same year, the company also faced a class action lawsuit filed in New Jersey by stockholders who alleged they were injured by its scheme of steering borrowers into more lucrative forbearance status rather than pointing them toward income-driven repayment plans.[49]
In 2022, Navient entered into a $1.85 billion settlement over accusations that it had misled borrowers into costly repayment plans and predatory loans. The settlement spanned 39 states and the District of Columbia and included $1.7 billion in loan cancellations and $95 million in payouts.[50] As of January 2022, the settlement is pending court approval.
Student Loan Justice has fought Navient by calling for bankruptcy laws to again include student loan debt.[51][52]
- "Navient has failed to perform its core duties in the servicing of student loans, violating Federal consumer financial laws....
- "Navient systematically deterred numerous borrowers from obtaining access to some or all of the benefits and protections associated with these plans [plans limiting repayment based on income]. Despite assuring borrowers that it would help them find the right repayment option for their circumstances, Navient steered these borrowers experiencing financial hardship that was not short-term or temporary into costly payment relief designed for borrowers experiencing short-term financial problems, before or instead of affordable long-term repayment options that were more beneficial to them in light of their financial situation.
- "For borrowers who did enroll in long-term repayment plans, Navient failed to disclose the annual deadline to renew those plans, misrepresented the consequences of non-renewal, and obscured its renewal notice to borrowers who were due for renewal. As a result, the affordable payment amount expired for hundreds of thousands of borrowers, resulting in an immediate increase in their monthly payment and other financial harm.
- "Navient also misreported information to consumer reporting agencies about thousands of borrowers who were totally and permanently disabled, including veterans whose total and permanent disability was connected to their military service, by making it appear as if those borrowers had defaulted on their student loans when they had not, damaging their credit; misrepresented one of its requirements for borrowers to release their cosigner from their private student loan, thereby denying or delaying access to an important feature on many cosigned private loans that relieves a cosigner of responsibility for the loan once the borrower meets certain eligibility criteria; and repeated the same errors in processing federal and private student loan borrowers’ payments month after month, even after borrowers complained to Navient about those errors."[41]
