Navient has agreed not to reenter the servicing space for the government's Direct Loan program. It is also prohibited from servicing or acquiring most loans from the Federal Family Education Lending Program, or FFELP. 

The firm will have to pay a $20 million penalty to the CFPB and set aside $100 million to compensate borrowers harmed by its practices, which CFPB Director Rohit Chopra said resulted in millions of borrowers needlessly defaulting on their student loans.

"We'll never know how much their lives have been ruined," Chopra said on a press call Thursday morning.

Navient warned investors last year that hefty fines were coming from the CFPB. In an October call with analysts, the company's CEO David Yowan said the total bill could be as high as $250 million. 

Thursday's settlement with the CFPB follows a larger agreement struck between Navient and several state attorneys general in 2022. The company agreed to forgive $1.7 billion worth of debt and made $95 million available for distribution to borrowers wrongfully steered into forbearance. 

Chopra said the enforcement actions "close the book" on the agency's investigation into Navient's student loan servicing business. The probe began in 2017 and found that the firm routinely steered borrowers who were behind on payments into forbearance instead of enrolling them in more affordable repayment plans offered by the government.

Chopra said that directing borrowers toward forbearance was less time consuming for Navient's staffers than educating consumers about other options that could benefit them more.

"It was about cutting corners to save money and pump up profits. Counseling borrowers about income-driven repayment plans during calls with borrowers experiencing financial distress and processing their applications is time consuming for servicers, but that's their job," he said. "To keep costs low, Navient encouraged its employees to push borrowers into forbearance, a much quicker and cheaper option for the company."

Paul Hartwick, a Navient spokesperson, said the company had already made most of the changes outlined in its agreement with the CFPB. It wound down its Direct Loan servicing in 2021 — something Chopra said was done at the direction of the Department of Education — and it has been minimally active in the FFELP space for even longer. The company stopped originating FFELP loans in 2010 and has not purchased a substantial portfolio of those loans since 2017. It began outsourcing the servicing of its legacy FFELP loans in July of this year.

Hartwick said other stipulations of the agreement have also been met, including policies around educating borrowers about income-driven repayment, loan consolidation and other programs to make repayment more feasible. These standards have also been applied to outsourced portfolios.

"This agreement puts these decade-old issues behind us," Hartwick said in a written statement. "While we do not agree with the CFPB's allegations, this resolution is consistent with our go-forward activities and is an important positive milestone in our transformation of the company."

He added that the company had already set aside $105 million in a reserve fund in anticipation of monetary penalties from the CFPB.

Eric Halperin, the CFPB's enforcement director, said the agency's probe focused primarily on Navient's federal student loan operations, though there were some "limited claims" regarding the company's servicing of private student loans. He noted that the $100 million of relief will only be available for government-backed loans that were steered into forbearance, estimating that "hundreds of thousands" of borrowers would be compensated. 

"We recognize issues in the private student loan market more broadly, and we'll continue to look at those for any servicer as part of our work here at the CFPB," Halperin said on a call with reporters.

In January, Navient announced that it would outsource its loan servicing business to St. Louis-based Missouri Higher Education Loan Authority, or MOHELA, starting in October. 

Navient was spunout out of Sallie Mae, a former government sponsored enterprise that issued student loans, in 2014. The firm's other business lines include health care, transportation, asset recovery and payment processing.