Good News, Bad News on Student Loans
Bad actor Navient shut down, but student loan interest rates going up
Student loan borrowers have long complained about the abusive tactics used by loan servicing giant Navient.
Now, Navient is facing consequences for its bad actions.
Specifically, the Consumer Financial Protection Bureau (CFPB) has effectively shut Navient out of the federal student loan program and also fined the company $120 million.
“For years, Navient’s top executives profited handsomely by exploiting students and taxpayers,” said CFPB Director Rohit Chopra. “By banning the notorious student loan giant from federal student loan servicing and ensuring the winddown of these operations, the CFPB will finally put an end to the years of abuse.”
Navient steered borrowers toward higher repayment options and failed to let borrowers know about income-driven repayment plans. These actions meant more profit for Navient - paid for by the borrowers. To be clear, Navient’s profit came by servicing loans in such a way that borrowers paid more than they were legally bound to pay. When borrowers complained, Navient obscured cheaper alternatives.
Now, Navient will not be allowed to participate in the federal direct student loan program.
Additionally, Navient will pay $100 million in refunds to harmed consumers and a $20 million civil penalty.
While the news for customers of Navient is positive, news around student loan interest rates could be problematic for students who took at loans to finance this year’s tuition.
A CFPB report reveals new rates, which went into effect on July 1, could increase total new student loan costs by $3 billion.
The average borrower will pay $466 more for an undergraduate loan than they did just one year ago.
