Student Loan Borrowers To Receive Settlement Checks

Thousands of student loan borrowers are set to receive payments following a major federal settlement with one of the country’s largest loan providers.

The agreement, which totals $120 million, stems from allegations that borrowers were directed into costly repayment paths instead of more affordable options.

Why the Settlement Was Reached

In 2024, the Consumer Financial Protection Bureau (CFPB) finalized a settlement with Navient, a Virginia-based company that previously handled millions of federal student loan accounts.

The CFPB accused Navient of directing struggling borrowers into forbearance rather than income-driven repayment plans that could have lowered their monthly bills.

In a statement outlining the case, the agency alleged: “Navient steered borrowers who may have qualified for income-driven repayment plans into forbearance instead. This practice was cheaper and simpler for Navient, but detrimental to borrowers. By steering struggling borrowers into forbearance—where interest continues to accrue and capitalize—Navient’s illegal actions led numerous borrowers to pay additional interest charges.”

Forbearance allows borrowers to temporarily pause payments, but interest continues to build, increasing the total owed over time. Income-driven repayment plans tie monthly payments to a borrower’s earnings and family size, and can reduce payments to as little as $0.

Navient has previously declined any wrongdoing, saying in a 2024 statement: “This agreement puts these decade-old issues behind us. 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.”

Newsweek has contacted Navient for comment via email.

Under the settlement, the company is to pay $120 million, including a $20 million civil penalty and $100 million earmarked for borrowers who were deemed harmed.

Who Is Eligible for a Payment?

Borrowers affected by the practices described in the lawsuit are eligible to receive compensation, says the CFPB. Payments began going out on February 13.

While the exact amount varies by individual, online posts from users discussing the settlement indicate payments can differ significantly.

Consumers do not need to file a claim or submit paperwork to receive the funds, with payments being distributed automatically. However, borrowers who believe they may qualify but have not received a check can contact Rust Consulting, the firm contracted to manage the distribution process, either via the toll-free number 1-800-711-8418 or via email, navient_info@rustcfpbconsumerprotection.org.

The payments do not reduce or alter any outstanding student loan balances. Borrowers are still expected to continue working with their current loan servicers regarding repayment.

Navient’s History and Previous Settlements

Navient, formerly part of Sallie Mae, was once the largest student loan servicer in the United States. When the CFPB filed its lawsuit in 2017, the company was overseeing student loans of more than 12 million borrowers, including over 6 million accounts under a contract with the Department of Education, according to the agency.

Navient’s contract with the Education Department ended in 2021, and it no longer services federal student loans.

The CFPB’s case followed an earlier multistate action. In 2022, 39 state attorneys general announced a settlement that required Navient to provide $1.85 billion in relief to resolve allegations of unfair and deceptive practices, according to the CFPB.