Navient Lawsuits and Settlements: What Borrowers Need to Know

Nearly every major Navient lawsuit is over. The federal and state cases have been resolved, the bankruptcy settlement has already been carried out, and borrowers who qualified for relief have either received refund checks or had their private loans erased. Most borrowers didn’t qualify, and there’s nothing to apply for now.

The only active case left is a new class action in Illinois that accuses Navient of running a fake private loan forgiveness program. Everything else — including the large state and federal settlements — has been fully administered.

Navient’s legal problems came from how it handled federal loans and how it made private loans.

Servicing failures on federal loans

Regulators found that Navient routinely steered struggling federal borrowers into long-term forbearances instead of affordable income-driven repayment (IDR) plans. Those decisions inflated balances with billions in extra interest and caused many borrowers to lose years of progress toward forgiveness.

Risky private lending

Between 2002 and 2014, while still part of Sallie Mae, Navient issued high-cost private loans to students at for-profit and low-performing schools such as ITT Tech and the Art Institute. Internal reviews showed many of those borrowers were likely to default. The loans were made anyway — mainly to help schools qualify for federal aid and to build Navient’s servicing business.

Escalating enforcement

Early fines, including a 2015 Justice Department settlement over overcharging military borrowers, failed to change the company’s behavior. That led to broader state and federal actions — including the 2022 multistate settlement, the 2024 CFPB order banning Navient from federal servicing, and multiple private-loan class actions that together delivered more than $2 billion in borrower relief.

In 2022, 39 states reached a $1.85 billion deal with Navient — mostly to fix how the company handled private and federal student loans. It wiped out debt for some borrowers, but most people didn’t qualify.

Who Got Relief

Navient canceled $1.7 billion in private loans that were already in default and charged off. These were mostly older subprime loans made between 2002 and 2014 to students at for-profit or low-performing schools like ITT Tech or the Art Institute. If your loan was current, or only slightly behind, it wasn’t included.

Another 350,000 federal borrowers who were steered into forbearance got $260 checks, but that part of the deal is also done.

If You Didn’t Qualify

If your loans weren’t canceled, you can’t apply retroactively — the settlement is closed. But there are still paths forward:

• Private loans: your options are either to negotiate a settlement (often between 30%–60% of the balance) or, in some cases, to apply for Navient’s private student loan forgiveness program if your school misled you — we cover that below.

• Federal loans: your relief now comes through federal programs like PSLF, Borrower Defense, or the IDR Account Adjustment — not through Navient.

You can also pursue individual legal action if you believe Navient violated consumer laws, but for most borrowers, settlement or school-based discharge are the only realistic options.

Related:

• How Navient Student Loan Forgiveness Works

• Will Navient Negotiate Student Loan Settlements?

In 2024, Puerto Rico reached a $7.7 million settlement with Navient over risky private loans made to local borrowers who were unlikely to repay them. The deal forgives certain private Navient loans held by residents of Puerto Rico, but it doesn’t apply to federal loans or borrowers outside the territory. Relief is expected to happen automatically for eligible borrowers.

The 2024 CFPB case officially forced Navient out of the federal student loan business. The company had already begun transferring its accounts, but the order made that exit permanent.

• Federal Direct Loans moved to Aidvantage, which now handles repayment and forgiveness under the Department of Education.

• Commercially held FFEL loans and some private loans moved to MOHELA, which services them on Navient’s behalf.

• Navient no longer manages any federal loans directly — only private and defaulted loans that it still owns.

Borrowers didn’t receive forgiveness or refunds from this case, but it’s the reason your loan likely changed servicers.

Related: Navient to Mohela: What Borrowers Should Know

Navient was sued for collecting on private student loans that should have been automatically discharged in bankruptcy. Courts found that many of those loans didn’t meet the legal definition of “educational loans.” The result was a 2023 class settlement requiring Navient to cancel about $182 million in balances and clean up borrowers’ credit reports.

That process is finished, but it matters if you still have older Navient loans. If your loans were for things like bar-study programs, vocational or unaccredited schools, or amounts above your school’s official cost of attendance, they may fall into the same category.

If that’s you, talk with your bankruptcy attorney about reopening your case or use the rulings as leverage to negotiate a deeper settlement.

Related: How to File Bankruptcy on Private Student Loans

The only active Navient lawsuit today is a 2025 class action filed in Illinois. It accuses Navient of running a “fake” private loan forgiveness program — officially called the School Misconduct Discharge Application.

The company created this program in 2024 for borrowers who said they were misled by their schools. But according to the lawsuit, Navient denied nearly every application, even when the schools involved — like ITT Tech or the International Academy of Design and Technology — had well-documented histories of fraud.

The case argues that Navient’s review process was a sham and that borrowers were never given real consideration or explanations for their denials.

If the court sides with borrowers, Navient could be forced to reopen and fairly review those claims, potentially leading to a new round of private loan discharges.

Right now, the case is still pending. If you applied for private loan forgiveness through Navient and were denied, keep all your correspondence — those records may matter if this lawsuit moves forward.