Prepared Remarks of CFPB Director Rohit Chopra on the Navient Enforcement Action Press Call

Today, we are closing the book on Navient –– one of the worst offenders in the student loan servicing industry, a company that has harmed millions of borrowers across the country. Today’s proposed order will permanently ban Navient from directly servicing federal student loans and deliver $100 million to the borrowers they harmed.

Shortly after the CFPB opened its doors, we sounded the alarm that student loan debt in America was underestimated and had crossed the $1 trillion mark. By 2017, when we filed our lawsuit, that debt had ballooned to $1.4 trillion. At that time, Navient was the largest student loan servicer in the United States, handling over $300 billion in federal and private student loans for more than 12 million borrowers. Borrowers don’t get to select who services their student loan, so more than a quarter of all student loan borrowers had no choice but to rely on Navient as their servicer.

About a decade ago, the CFPB had also launched its investigation into Navient. Navient was formerly known as Sallie Mae. Sallie Mae, like Fannie Mae and Freddie Mac, was a government-sponsored entity that was supposed to promote access to higher education and funding. In 2004, Sallie Mae became fully private. But its connections to federal student loans didn’t stop. Among its many businesses as a private company was to bid on federal student loan servicing contracts for loans originated or purchased by the Department of Education. Despite being a private company, Sallie Mae continued to receive a wide array of taxpayer-funded subsidies and support.

In 2011, the CFPB opened its doors and was charged with ensuring that consumer protection laws were being followed when it comes to student loans. Congress had specifically tasked the CFPB to supervise the student lending market because it recognized that many of the student loan scandals of the 1990s and 2000s, along with the sheer size of the market, made a potential student loan financial crisis all that more likely.

From the beginning, there were clear signs that Sallie Mae, which would later transform into Navient, thought the laws of the United States didn’t apply to them. In 2014, stemming from a referral from the CFPB based on consumer complaints, the Justice Department and the FDIC ordered Navient and its predecessor, Sallie Mae, to pay nearly $100 million for illegally overcharging nearly 78,000 servicemembers. But the CFPB’s investigation discovered that Navient’s harmful practices were far more extensive and deeply ingrained. The most egregious of these was their practice of steering borrowers into forbearance instead of income-driven repayment plans. This widespread and systemic practice padded Navient's profits while devastating the financial futures of countless borrowers.

The motivation behind this steering was clear: it was about cutting corners to save money and pump up profits. Counseling borrowers about income-drive repayment plans during calls with borrowers experiencing financial distress and processing their applications is time-consuming for servicers. To keep costs low, Navient encouraged its employees to push borrowers into forbearance, a much quicker and cheaper option for the company. This approach allowed Navient to process more calls in less time, boosting their bottom line. However, it came at a severe cost to borrowers, whose balances swelled with accrued and capitalized interest and who were denied the opportunity to enroll in repayment plans that could have significantly lowered their monthly payments and set them on a path to loan cancellation.

Navient's other illegal practices included failing to properly process payments, applying payments to the wrong loans or in incorrect amounts, and mishandling loans for borrowers with disabilities. For borrowers who had received federal student loan discharges due to total and permanent disability, including severely injured veterans, Navient failed to report the correct information to credit reporting companies, telling them the loans were in default rather than discharged.

The CFPB's investigation opened the floodgates for oversight from other regulators and law enforcement agencies. The Attorneys General of Illinois, Washington, Pennsylvania, and California, who joined our investigation, also sued Navient. And in 2022, 29 state attorneys general announced a separate action against Navient that delivered debt cancellation for many borrowers, further underscoring the widespread nature of the company's harmful practices.

Importantly, as a result of the harm documented by our lawsuit and other findings, the Department of Education has taken action to address widespread breakdowns in the income-driven repayment program. These efforts have resulted in more than $50 billion in debt relief for borrowers, many of whom were wrongly steered into forbearance, as well as those who had payments miscounted.

Today's action doesn't just hold Navient accountable for past misconduct—it ensures that the company can never creep its way back into a federal contract and take advantage of students and taxpayers. The Department of Education transferred Navient’s contract to another servicer in 2021. But the ban in today’s action bars Navient from competing to service loans for the Department of Education ever again. It also permanently bars Navient from massively scaling up its purchases of federal student loans owned by private companies that are bought and sold in the financial marketplace.

Looking forward, we are committed to continuing our oversight of the student loan market, which has such an outsized impact on so many people’s financial lives. We have taken action against other bad actors, including the Pennsylvania Higher Education Assistance Agency, the National Collegiate Student Loan Trusts, and Wells Fargo for illegal activities and servicing failures. CFPB closely monitored servicer conduct in the months following the resumption of student loan payments, identified risks to borrowers, and worked with the Department of Education to protect borrowers and taxpayers.

Today’s order marks a significant step in protecting student loan borrowers and enforcing consumer protection laws. Navient is now almost completely out of the federal student loan servicing market and we’ve ensured they cannot re-enter it in the future. It is also the product of significant work with the state attorneys general and the Department of Education over many years.

For too many Americans, Sallie Mae and Navient turned the dream of higher education into a nightmare. But today, we turn the page on that dark chapter. Our goal is clear: to provide relief for those harmed and prevent future borrowers from facing similar exploitation. Together, we can make higher education a path to opportunity, not financial distress.