Thousands of former federal student loan borrowers in the United States may soon receive settlement checks worth up to $2,000 following a legal case involving major loan servicer Navient.
According to a report by Newsweek, the payments stem from a lawsuit filed by the Consumer Financial Protection Bureau, which accused the company of improperly steering struggling borrowers into forbearance programs instead of directing them toward more affordable repayment options.
Navient denied the allegations but agreed to a settlement that includes $100 million in refunds for borrowers and a $20 million penalty.
Why the settlement was reached
The CFPB alleged that Navient placed borrowers into forbearance, a temporary pause on loan payments where interest continues to accumulate, rather than helping them enroll in income-driven repayment plans that could have lowered monthly payments.
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The lawsuit also claimed the company mishandled payment processing and caused credit harm to some borrowers, including disabled veterans.
Navient, one of the largest student loan servicers in the country and previously known as Sallie Mae, ultimately agreed to resolve the dispute without admitting wrongdoing.
Who may qualify for the payments
Borrowers may qualify for the settlement if their federal student loans were serviced by Navient, or by Sallie Mae before the companies separated, and if they were placed into forbearance in 2017 or earlier.
The CFPB said eligible borrowers do not need to apply to receive the money. Checks are being mailed automatically to qualifying individuals.
According to Newsweek, some borrowers have already reported receiving payments ranging from about $50 to as much as $2,000.
Experts say impact may be limited
Financial experts say that while the payments could help some borrowers, the compensation may not fully offset the financial strain many experienced.
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Kevin Thompson, CEO of 9i Capital Group, told Newsweek that borrowers whose loans were pushed into forbearance may have faced years of financial consequences.
“If you had a loan pushed into forbearance or otherwise mishandled by Sallie Mae (now Navient) prior to 2017, you may be eligible for some restitution,” Thompson said. However, he noted that the settlement came without an admission of fault and offered limited accountability.
Alex Beene, a financial literacy instructor at the University of Tennessee at Martin, said that only a relatively small group of borrowers connected to Navient would qualify for compensation.
What borrowers should do next
The CFPB advises borrowers who believe they may qualify but have not yet received a check to wait until after March 30 before contacting the agency.
Borrowers who accidentally discard their payment can request a replacement through the settlement administrator listed on the CFPB’s website.