Millions in Checks Go Out in Student Loan Servicer Settlement

Settlement checks are being sent to federal student loan borrowers affected by a long-running case involving former loan servicer Navient.

Under a final judgment entered in 2024, Navient is paying out $120 million to settle allegations by the Consumer Financial Protection Bureau (CFPB) that it engaged in widespread servicing failures. Payments, including $100 million to affected borrowers, began on Feb. 13, according to the settlement.

The case dates back to 2017, when the CFPB filed suit against Navient, which, at the time, serviced more than 6 million federal student loan accounts. The agency accused the company of steering struggling borrowers into costly, long-term forbearance instead of directing them to more affordable income-driven repayment plans, which allegedly caused borrowers to accrue far more interest over time.

The federal complaint also alleged misapplied payments, inaccurate credit reporting, and misleading information provided about repayment options and co-signer release.

Navient has stated that it disagrees with the allegations. Still, the company agreed to the settlement, which includes a ban on servicing most federal student loans going forward. Navient had already pulled out of the student loan market in 2021, when its remaining portfolio was transferred to another servicer, Aidvantage.

The settlement also requires Navient to pay $100 million in redress to affected borrowers and a $20 million penalty to the CFPB victims’ relief fund. Eligible borrowers will receive checks by mail.

To qualify for a redress payment, a borrower must have had one or more student loans serviced by Navient Solutions or Pioneer Credit Recovery and must have been identified in Navient’s records as harmed by the companies’ servicing practices. That may include being steered into forbearance instead of being offered income-driven repayment options, experiencing misapplied payments or inaccurate credit reporting, or receiving misinformation about repayment options.

The amount of each payment varies. The settlement administrator calculates payments based on factors such as the total number of eligible borrowers, the number and size of loans involved, and the nature and extent of the documented harm. Early recipients have reported on social media, including Reddit’s r/StudentLoans community, that checks range from a few hundred dollars to several thousand dollars.

Eligible borrowers do not need to submit a claim form or take any action to receive payment. Consumers who believe that they may qualify but have not received a check can contact Rust Consulting, the settlement payment administrator, according to the CFPB.

The CFPB has also emphasized that the redress payments are separate from borrowers’ underlying loan balances. The payments do not change the amount the borrowers may still owe, and they should continue working with their current servicers for repayment and account management, according to the CFPB.

The agency also warned consumers to watch for scammers who may try to obtain money or personal information from people expecting settlement payments.

“The CFPB will never require consumers to pay money to obtain redress, nor will we ask for additional information before consumers can cash a redress check that we’ve issued,” the agency stated.