Navient is banned from issuing federal student loans and must pay borrowers $100 million in compensation.

Navient will no longer be allowed to issue federal student loans and will have to pay $120 million in fines and compensation to borrowers harmed by its business practices. This is the result of a proposed settlement with the American consumer protection agency Consumer Financial Protection Bureau.

The settlement announced Thursday comes nearly eight years after the CFPB sued Navient, formerly known as Sallie Mae, after a CFPB investigation found Navient lured student loan borrowers into more expensive repayment plans and diverted them from cheaper income-driven options. Navient faces a $100 million payment, distributed to hundreds of thousands of borrowers, and a $20 million fine.

The proposal ends a lawsuit the federal regulator filed in 2017 in federal court in Pennsylvania. The company was the largest student loan servicer in the country at the time, serving more than 12 million borrowers, the CFPB found. The loan servicer allegedly mismanaged payment processing. Impairment of the creditworthiness of disabled borrowers whose loans had been forgiven, the agency claimed.

“Today we close the chapter on Navient, one of the worst offenders in the student loan servicing industry and a company that harmed millions of borrowers across the country,” CFPB Director Rohit Chopra told reporters on Thursday.

Navient will no longer purchase or manage federal student loans after the contract was transferred to another company in 2021.

“While we disagree with the CFPB's allegations, this resolution is consistent with our future operations and is an important positive milestone in our transformation,” the Herndon, Virginia-based company said in a statement on Thursday. It had agreed earlier this year to outsource student loan administration for certain legacy portfolios.

“For years, Navient's top executives have profited handsomely by exploiting students and taxpayers,” Chopra said in a statement. “By barring the notorious student loan giant from servicing federal student loans and ensuring the unwinding of these transactions, the CFPB will finally put an end to years of abuse.”

The deal means hundreds of thousands of people will be compensated, a CFPB official said during a news conference. The CFPB said it will send checks to people who are eligible for compensation under the settlement.

“Consumers do not need to take any action to receive redress and should be wary of scammers who may try to use CFPB employees' names and images to steal money or private information. The CFPB will never ask consumers for money to receive redress, nor will we require consumers to provide additional information before they can cash a redress check we issue,” the agency warned.

The agreement is not a new one for the company. In 2022, it reached 1.85 billion US dollars The country has reached an agreement with 39 states and agreed to forgive around 66,000 student loans to settle allegations of usurious lending.