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Media Press Releases Student Borrower Protection Center Statement on Navient’s Settlement with 39 States Cancelling $1.7 Billion in Predatory Private Student Loans

Student Borrower Protection Center Statement on Navient’s Settlement with 39 States Cancelling $1.7 Billion in Predatory Private Student Loans

January 13, 2022 | WASHINGTON, DC — Today, 39 states settled lawsuits and investigations against the student loan giant Navient Corporation (Navient) related to allegations of predatory lending and illegal student loan servicing that harmed borrowers nationwide. Per the terms of the settlement, with a bipartisan group of 39 state attorneys general, borrowers will enjoy $1.7 billion in cancellation on dangerous, high-cost private student loans. The states had alleged that more than a decade ago Sallie Mae, the former parent company of Navient, peddled “risky and expensive subprime loans that they knew or should have known were likely to default.” In addition, lawsuits filed by several of the states allege that Navient broke a wide range of state and federal laws as a student loan servicer, including by pursuing a years-long scheme to steer borrowers into high-cost repayment options and away from income-driven repayment.

In response to this announcement, Student Borrower Protection Center Executive Director Mike Pierce released the following statement:

“At long last, the student loan borrowers who had been forced to shoulder the burden of dangerous and predatory private student loans made by Sallie Mae and owned by Navient will finally be debt free. Today’s action is a clear victory for many of the millions of borrowers whose pain Navient and Sallie Mae shamelessly turned into profit. Navient cheated borrowers at every stage of repayment, taking advantage of low-income borrowers, disabled veterans, seniors, and more, all in service to its bottom line. Today, these 39 states won a hard-fought battle to remedy this long history of abuse.

Borrowers may not be able to enjoy Navient CEO Jack Remondi’s $8 million salary, his three homes, or his use of the company’s private jet. But they can rest a little bit easier knowing that a measure of justice has been served.”

Background on the Sallie Mae and Navient Predatory Private Lending Scheme

Created in 2014 after being spun off from the student loan company Sallie Mae, Navient operates in various markets including student loan servicing, debt collection, and consumer lending. Though Navient recently exited its role as a servicer on behalf of the U.S. Department of Education, the company continues to collect on more than $54 billion in government guaranteed loans originated under the older, bank-based federal student loan program and $20 billion in other private education loans, making it the largest single private-sector creditor in the student loan market.

Navient and its predecessor, Sallie Mae, have been at the forefront of many of the most abusive practices that have pervaded both the federal and private student loan markets. For example, during a “boom” in private lending to students that lasted from the mid-2000s until 2010, many financial services companies and banks pushed billions of dollars of high-rate loans onto vulnerable borrowers, particularly those borrowers attending for-profit schools. They did this, in part, as a marketing ploy to make more lucrative federal student loans to the same students through a guaranteed lending scheme ended by Congress in 2010. Sallie Mae led the way in the midst of this mania, with its then-CEO Thomas Fitzpatrick telling an internal meeting of executives in 2007:

If the borrower can create condensation on a mirror, they need to get a loan this year.”

Lawsuits later revealed that one set of these predatory Sallie Mae private student loans had default rates ranging “between 50 and 92 percent every year from 2000 to 2007,” and that Sallie Mae’s own expectations were that these loans would default at rates as high as 92 percent. A 2007 internal memo from Sallie Mae explained that the company was using these doomed loans as a tool to build relationships with colleges, who would be paid the proceeds of the loan regardless of whether the borrower ultimately defaulted, and who could then direct valuable federal student lending business to Sallie Mae. Proceeds from this federal student loan business would more than cover losses on Sallie Mae’s private student loan portfolio—even while wreaking havoc on borrowers’ financial lives. 

Background on Abusive and Illegal Student Loan Servicing by Navient

Navient’s nearly decade-long experience as a servicer on behalf of the Department of Education has been marked by failure, scandal, and unparalleled borrower harm. Nevertheless, during this time Navient has made its owners and executives rich, paying more than $4.9 billion to shareholders through dividends and stock buybacks and lavishing more than $47 million on its CEO, Jack Remondi.

The attorneys general of Illinois, Washington, Pennsylvania, California, Mississippi, and New Jersey all sued Navient for violating borrowers’ rights. State-level allegations against Navient include that it improperly reported permanently disabled borrowers as being in default on loans that should have been forgiven, and that it trapped thousands of older people in debts they were entitled to escape under the terms of their loan contract by deceiving borrowers about their rights.

The company’s abuses are far-reaching and the financial consequences for borrowers are ongoing. Since 2011, tens of thousands of borrowers have filed complaints with Navient, the CFPB, and other government agencies about the obstacles they faced in repaying student loans that Navient services. Navient’s track record of harm includes the following:

  • Navient illegally overcharged nearly 78,000 servicemembers. In 2014, Navient and its predecessor Sallie Mae paid almost $100 million in restitution and fines after the FDIC and DOJ found that the two companies ignored the 6 percent interest cap for servicemembers, unfairly conditioned receipt of SCRA benefits on made-up and difficult-to-attain qualifications, and deceptively allocated borrowers’ payments across loans in a way intended to maximize late fees. As law enforcement highlighted at the time, this happened even after Navient had “been put on notice of these borrowers’ active duty status.”
  • Navient forced borrowers to pay more than they had to on their loans, adding up to $4 billion in avoidable interest charges. In 2017, the Consumer Financial Protection Bureau (CFPB) sued Navient for failing borrowers at every stage of repayment. The CFPB’s findings included that Navient had inappropriately and abusively placed struggling borrowers into high-cost repayment plans instead of more appropriate income-driven repayment plans that they are legally entitled to, costing borrowers as much as $4 billion in unnecessary interest charges and fees.
  • Navient steered struggling borrowers to higher-cost repayment plans. In 2018, Senator Elizabeth Warren uncovered an audit of Navient conducted by the U.S. Department of Education, indicating that Navient boosted its profits by steering some borrowers into high-cost plans without discussing options that would have been less costly in the long run. In 2019, this finding was verified by the Education Department’s Inspector General, which reviewed documents prepared by Federal Student Aid showing that Navient representatives did not offer alternative or potentially beneficial options when attempting to assist borrowers with bringing their account current or managing repayment. Amid mounting litigation, three Congressional committees have launched inquiries into predatory loan servicing practices and efforts by Trump Administration officials to hide abuses by the student loan industry.
  • Navient evaded financial accountability. In February, Navient was ordered to pay the Department of Education back more than $22 million it had illegally taken from taxpayers by gaming an interest rate subsidy program.

Under the weight of these abuses, the U.S. Department of Education cut ties with Navient last year. Once the largest servicer of student loans owned by the U.S. Department of Education, Navient no longer serves as one of the government’s student loan servicing contractors, transferring all student loans it once serviced to Maximus (a/k/a Aidvantage) in late 2021.


The Student Borrower Protection Center is a nonprofit organization focused on alleviating the burden of student debt for millions of Americans. The SBPC engages in advocacy, policymaking, and litigation strategy to rein in industry abuses, protect borrowers’ rights, and advance economic opportunity for the next generation of students.

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