Sallie Mae Spin-Off Expects $103 Million Hit From Probes

Insider Higher Ed:

Navient, the loan-servicing company formerly known as Sallie Mae, disclosed to investors Friday that it expects to pay an additional $103 million to settle two federal investigations, on top of the $70 million it already set aside last year for that purpose. The company is facing investigations from the Federal Deposit Insurance Corporation, the Department of Justice, and other federal and state agencies over how it managed and processed the payments of student loan borrowers, including active-duty servicemembers.

The spin-off of Sallie Mae’s loan-servicing business into its own independent company, Navient, was officially completed at the end of April. Navient now inherits all liability stemming from the federal and state investigations of Sallie Mae’s loan-servicing business, the company said. The FDIC has cited Sallie Mae for unfair or deceptive acts involving the way it made disclosures to borrowers and assessed certain late fees.

Navient said Friday that, based on its discussions with the FDIC, the company believes it will be required to refund $30 million worth of certain late fees to borrowers of Sallie Mae loans dating back to November 2005. In addition, in an effort to “treat all customers in a similar manner,” Naveint said it also expected to “voluntarily” reimburse $42 million in late fees for borrowers whose loans were not owned by Sallie Mae but were serviced by them.