Navient Banned from Federal Student Loan Servicing: What You Should Know

Navient, one of the nation’s largest student loan servicers, has been barred from handling federal student loans. As part of a proposed settlement with the Consumer Financial Protection Bureau (CFPB), Navient is set to pay $120 million in fines and compensation to borrowers harmed by its practices. 

This development comes nearly eight years after the CFPB sued Navient, accusing the company of directing borrowers into more expensive repayment plans rather than the lower-cost income-based options available to them. 

Navient, formerly known as Sallie Mae, no longer services federal student loans, having transferred its contract in 2021 to another company. According to the settlement, Navient will pay $100 million to be distributed among over 400,000 borrowers, plus an additional $20 million in fines. The CFPB announced that eligible borrowers will receive checks in the mail.

The proposed settlement ends a lawsuit that was first filed by the Consumer Financial Protection Bureau (CFPB) in 2017 in a Pennsylvania federal court. At the time, Navient was the largest student loan servicer in the U.S., managing more than 12 million loans. The CFPB accused the company of allegedly mishandling payment processing, which negatively impacted the credit of disabled borrowers whose loans had been discharged.

This is not Navient’s first settlement. In 2022, the company agreed to a $1.85 billion settlement with 39 states, which included canceling around 66,000 student loans to resolve claims of predatory lending practices.

If you currently have a federal student loan that was once serviced by Navient, here’s what you need to know and steps you should take.

What you should know if Navient serviced your loans 

Navient is no longer your loan servicer

Navient no longer services federal student loans, having transferred that responsibility to another company in 2021. You don’t need to wait for communication from a new servicer, as your loans were already transferred. If you were unsure of your servicer or haven’t been monitoring your loan status, now is a good time to check with the Department of Education’s Federal Student Aid website.

Navient’s misconduct and compensation

Navient is being held accountable for directing borrowers toward costlier repayment options instead of guiding them to income-based repayment plans. If you were impacted by Navient’s practices, you may be eligible for compensation as part of the $100 million settlement. The CFPB has confirmed that it will mail checks to affected borrowers, so make sure your contact information is up-to-date with your loan servicer.

Check your loan status and payments regularly

It’s essential to stay informed about your loan details and payment history. Regularly check your loan status on the Federal Student Aid (FSA) website to verify the accuracy of your loan records and to ensure that you are on track with payments through your current loan servicer.

Income-based repayment options remain available

Even though Navient is no longer servicing your loan, you can still take advantage of repayment plans like Income-Based Repayment (IBR) or Pay As You Earn (PAYE). Contact your current loan servicer to explore these options if you were not directed to them by Navient in the past.

Stay alert for scams

With any major change like this, scammers may try to swoop in and take advantage. Be cautious of anyone claiming to offer quick loan forgiveness or requesting fees to transfer your loans. Legitimate communications about your student loans will come from your current loan servicer or government agencies, and they will not ask for upfront payments or personal information over the phone.

Keep records of your loan payments

If you have loan payment records from your time with Navient, it’s a good idea to save them. This will help you maintain an accurate history of your payments in case any discrepancies arise with your current servicer.

For questions, contact your current servicer or Federal Student Aid

If you have concerns about the status of your loan or how this settlement may affect you, contact your current loan servicer or the Department of Education’s Federal Student Aid office for clarification. They can help you with any questions about your loan repayment plan or compensation eligibility.

MoneyLion has your back

Navigating student loan changes can be overwhelming, but MoneyLion is here to help. Stay informed and take control of your financial future with our tips and tools. For more guidance, download the MoneyLion app today.