Thousands of former federal student loan borrowers are beginning to receive settlement checks of up to $2,000 after student loan servicer Navient agreed to pay $100 million in refunds.
The payments stem from a lawsuit brought by the Consumer Financial Protection Bureau (CFPB), which accused Navient of improperly steering struggling borrowers into forbearance instead of income-driven repayment (IDR) plans that could have lowered their monthly bills.
Navient has denied wrongdoing but agreed to settle the case.
Why It Matters
The case could usher in increased federal scrutiny of student loan servicers.
As part of the settlement, Navient is banned from servicing federal student loans, which could signal tougher enforcement and accountability standards for companies that manage student loan borrowers’ debts.
What To Know
Navient is one of the nation’s largest student loan servicers and formerly known as Sallie Mae. The company agreed to a settlement that included a $20 million fine and $100 million in compensation for affected borrowers.
According to the CFPB, the company placed borrowers into forbearance, pausing payments while interest continued to accrue, rather than guiding them toward IDR plans that may have been more affordable. The lawsuit also alleged Navient mishandled payment processing and harmed the credit of some disabled borrowers, including veterans.
Borrowers may qualify for a settlement check if they had federal student loans serviced by Navient (or previously Sallie Mae) and were placed into forbearance in 2017 or earlier.
“If you had a loan pushed into forbearance or otherwise mishandled by Sallie Mae—now Navient—prior to 2017, you may be eligible for some restitution. But let’s be clear about what this actually is: a settlement without any admission of fault and very little real accountability for the institution involved,” Kevin Thompson, the CEO of 9i Capital Group and the host of the 9innings podcast, told Newsweek.
“The real victims here are the borrowers whose credit was damaged and whose financial lives were thrown off course for years. Interest kept compounding, balances grew, and repayment timelines stretched far longer than they should have.”
Eligible borrowers do not need to apply or submit paperwork to receive the money. The CFPB said checks are being mailed automatically to qualifying borrowers.
Some borrowers have already reported receiving checks, with amounts ranging from as little as $50 up to $2,000.
What People Are Saying
Kevin Thompson, the CEO of 9i Capital Group and the host of the 9innings podcast, told Newsweek: “In reality, this won’t impact a large number of people, and the payouts themselves are relatively immaterial. The years of financial hardship and stress many borrowers experienced simply cannot be repaired by a small settlement check.”
Alex Beene, a financial literacy instructor for the University of Tennessee at Martin, told Newsweek: “While student loan borrowers undoubtedly get excited by the prospect of a check coming their way, only a small number of loan holders tied to one company will actually qualify for compensation. Navient was subject to legal action from some borrowers claiming the company pushed them into forbearance instead of helping them apply for income-driven repayments that would have lowered monthly payment amounts and offered a clearer pathway forward.”
What Happens Next
The CFPB advises borrowers who believe they qualify but have not received a check to wait until after March 30 before contacting the agency’s hotline.
Borrowers who may have accidentally discarded their check can contact the settlement administrator listed on the CFPB’s website to request a reissue.
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