SCRANTON, Pa. (Legal Newsline) - After fighting for seven years, a company that services student loans has agreed to pay $120 million and quit handling some types of loans to end litigation.
The federal Consumer Financial Protection Bureau sued Navient Corp. in 2017 in Pennsylvania federal court, where the company raised several arguments in its defense over the years. It was accused of giving bad advice to individuals struggling to pay their balance.
However, the case persisted, and an agreement finalized Sept. 12 bars Navient from servicing federal Direct Loans and loans under the Federal Family Education Loan Program. The company already doesn't handle these loans.
"In 2021, with the approval of the Department of Education, Navient transferred its contract to service government student loans to a third party, and earlier this year, Navient reached an agreement to outsource student loan servicing of its legacy FFELP student loan portfolios, which began on July 1, 2024," the company said.
Navient contested allegations it steered borrowers toward forbearance, in which payments are suspended while interest continues to grow. Those borrowers weren't told of applicable federal forgiveness programs, the CFPB claimed.
Through the years, Navient made arguments like the CFPB's structure was unconstitutional and when the U.S. Supreme Court agreed (in a separate case), Navient said ratification of the decision to sue it was done after the statute of limitations had expired.
It also said the CFPB was attempting to impose new regulations through its litigation against Navient rather than going through a proper rulemaking procedure. Part of that change was requiring servicers to go through a question-and-answer process designed by the CFPB."
Navient even found a former CFPB economist to testify on its behalf but motions for summary judgment were denied.
Nothing much happened on the docket after Judge Robert Mariani denied Navient's motion for judgment on the pleadings, which was appealed to the U.S. Court of Appeals for the Third Circuit in 2021.
Mariani granted a motion to stay proceedings then, and the Third Circuit ruled in July 2021 it couldn't hear the appeal. Little was filed on the docket after that until the settlement.