The US barred Navient from the student-loan biz as the college-debt debacle drags on

Payment due… America’s former largest student-loan servicer is being booted out of the college-debt biz. Yesterday a consumer watchdog permanently barred Navient from servicing federal student loans and Navient agreed to pay a $120M settlement. The Consumer Financial Protection Bureau accused the servicer — which in 2017 facilitated $300B+ in federal and private student loans — of failing borrowers by steering them away from affordable repayment plans. Two years ago, Navient reached a ~$1.9B settlement in a related lawsuit from 39 states.

• Compounding: The CFPB said Navient pushed customers to delay loan payments through forbearance (when interest keeps accruing). 1.5M+ customers were enrolled in at least two forbearances in a row, creating $4B in additional interest owed.

• Already out: Navient exited federal loan servicing in 2021, which lawmakers celebrated. In January, Navient said it would outsource its remaining student-loan portfolio to Mohela this year.

IOU confusion… The student-loan repayment system has never been known for its seamless organization, but it’s gotten particularly jumbled lately. 40% of borrowers had their servicers change during the pandemic repayment pause as debtors ditched the industry. When payments restarted in October, borrowers had to deal with incorrect bills, glitchy websites, and long hold times. Adding to the hot mess: President Biden’s relief programs are being held up in court, leaving borrowers in the lurch.

• Coming up: The yearlong student loan on-ramp period — which prevented missed payments from being reported to credit agencies — is ending on September 30.