Sallie Mae Class Action Lawsuit: CFPB and State AG Settlements

The Sallie Mae class action lawsuit history is really several stories at once: a string of settlements totaling more than $2 billion, most of them technically filed against Navient after it split from Sallie Mae in 2014, plus a brand-new 2025 securities case against the current Sallie Mae company. If you had a federal or private student loan serviced by Sallie Mae or Navient in the last two decades, you may already have received a payout, be receiving one now, or have had a loan balance cancelled outright.

Why Most of the Big Cases Name Navient

In April 2014, SLM Corporation split into two companies. Navient took over servicing of roughly $300 billion in existing federal and private loans for about 12 million borrowers. The remaining Sallie Mae kept the consumer banking business and continued originating new private education loans. Navient trades as “NAVI”; Sallie Mae continues as “SLM.”¹

This matters when you go looking for your case. The state attorney general settlement, the CFPB enforcement action, and the servicemember consent orders all name Navient as defendant even though the conduct dates back to the pre-split Sallie Mae years. If your loan was originated by Sallie Mae before 2014 and later serviced by Navient, you are likely covered by the Navient settlements.

The CFPB Settlement: Checks Going Out Now

The Consumer Financial Protection Bureau sued Navient in January 2017 in the Middle District of Pennsylvania, alleging the company steered more than one million federal student loan borrowers into costly forbearances instead of telling them about income-driven repayment plans that could have cut their payments, sometimes to zero. The CFPB estimated the practice cost borrowers as much as $4 billion in avoidable interest and fees. The complaint also alleged Navient misled borrowers about recertification deadlines, misapplied payments, reported false information about disabled borrowers, and deceived them about cosigner release.²

The case ended in a stipulated final judgment on September 12, 2024.³ Navient paid $100 million in restitution to affected federal borrowers and a $20 million civil penalty. The order also permanently banned Navient from servicing federal Direct Loans.⁴

Checks began going out February 13, 2026, and payments remain ongoing as of mid-2026.⁵ You do not need to file a claim. Rust Consulting is administering the payments, and reported check amounts have ranged from $100 to $2,000.⁶ The checks do not change or reduce any current student loan balance; keep paying your servicer as normal.

If you think you should have received a check and haven’t, contact Rust Consulting at 1-800-711-8418 or navient_info@rustcfpbconsumerprotection.org.⁵

The $1.85 Billion State Attorney General Settlement

On January 13, 2022, a bipartisan coalition of 39 state attorneys general and the District of Columbia reached a $1.85 billion settlement with Navient. It resolved a multistate investigation and independent lawsuits from Illinois, Washington, Pennsylvania, California, Mississippi, and New Jersey.⁷

Three buckets of relief came out of it:

$1.7 billion in private loan cancellation for nearly 66,000 borrowers, most of whom had attended for-profit schools. Borrowers who made payments after June 30, 2021, on qualifying loans also got refunds.⁷
$95 million in restitution to about 350,000 federal borrowers steered into long-term forbearance, at roughly $260 each.⁸
$142.5 million paid directly to participating states.⁷

Relief was automatic. Private-loan borrowers were notified by July 2022, and federal restitution went out in mid-2022 through Rust Consulting. The deadline to request a check reissue expired on August 31, 2023. To qualify for federal restitution, borrowers had to have entered repayment before January 2015, spent at least two consecutive years in forbearance between October 2009 and January 2017, and resided in a participating state or had a military postal code as of January 2017.⁹

State-level shares give a sense of scale. Illinois borrowers received $4.9 million in restitution across 18,470 people, plus about $133.5 million in debt cancellation for 5,217 borrowers.¹⁰ California borrowers received about $11.5 million in restitution and roughly $261 million in cancellation.¹¹

The $96.6 Million Servicemember Settlement

In May 2014, the Department of Justice and the FDIC announced a $96.6 million enforcement action against Sallie Mae Bank and Navient Solutions for violating the Servicemembers Civil Relief Act, which caps interest at 6% on pre-existing loans when a borrower goes on active duty. Investigators found the company denied those protections to service members, including some deployed in combat zones, by demanding unnecessary paperwork and providing unclear or inaccurate information about their rights.¹²¹³

The $76 Million Collection Fee Settlement in California

One of the earlier class actions, Angelo Bottoni, et al. v. Sallie Mae Inc. (Case No. 3:10-cv-03602, N.D. Cal.), alleged Sallie Mae breached its own loan contracts by adding a flat 25% collection fee to defaulted private loans the moment they went to collectors, before actual costs were incurred. The complaint said Sallie Mae assessed nearly $117 million in these fees between 2006 and 2010.¹⁴

The settlement retroactively cut the 25% fee to 8.75% at charge-off, producing about $76 million in debt reduction for more than 40,000 California borrowers. Class members who had already paid off their loans received $40 cash refunds, distributed automatically. A federal judge granted final approval in late 2013.¹⁵

Why the Private Loans Got Cancelled

The $1.7 billion private loan cancellation was not a goodwill gesture. A 2017 Illinois Attorney General complaint alleged that from 2006 to 2007, Sallie Mae controlled 42% of the private student loan market and knowingly issued expensive subprime loans to borrowers likely to default.¹⁶ Internal documents cited in later lawsuits showed certain portfolios had annual default rates of 50% to 92% between 2000 and 2007. According to state investigators, Sallie Mae issued high-risk loans deliberately, to build relationships with schools and win their federal loan business.¹⁷ The loans cancelled in 2022 were drawn largely from these portfolios, many held by former students of ITT Technical Institute and the Art Institutes.

The 2025 Securities Class Action Against Current Sallie Mae

The Sallie Mae operating today, focused on private education lending since the 2014 split, faces its own new case. Filed in December 2025 in the District of New Jersey, Zappia v. SLM Corporation a/k/a Sallie Mae et al. (Case No. 2:25-cv-18834) names CEO Jonathan W. Witter and CFO Peter M. Graham and alleges violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934.¹⁸

The class period runs July 25 to August 14, 2025. The complaint alleges Sallie Mae told investors that rising loan delinquencies were normal seasonal movement while failing to disclose a real jump in early-stage delinquencies. A TD Cowen analyst report on August 14, 2025, showed July delinquencies had risen 49 basis points month over month, well above the roughly 10-basis-point seasonal norm. The stock fell 8.09% the next day to $30.32, and dropped another 14.94% on December 9, 2025, after an investor presentation.¹⁹

The lead plaintiff deadline was February 17, 2026. No class has been certified as of mid-2026. This case is relevant to SLM shareholders during the class period, not to student loan borrowers.¹⁸

If a Debt Buyer Sues You Over an Old Sallie Mae Loan

The class actions and government settlements did not sweep every account. Defaulted private Sallie Mae loans are frequently sold to debt buyers, and one of the more active is Southwood Financial Trust, which purchases old accounts and sues borrowers directly.²⁰ Because private student loans are contract debts rather than federal loans, borrowers sued this way do not have access to income-driven repayment or public service loan forgiveness.

Defenses commonly raised in these suits include challenging the debt buyer’s standing by demanding a complete chain of assignment from Sallie Mae, invoking the statute of limitations (six years for contract claims in New York, for example), asserting improper service, and arguing unconscionability or fraudulent inducement. Borrowers contacted by third-party collectors also have rights under the Fair Debt Collection Practices Act, including limits on call hours and the right to demand in writing that a collector stop contacting them.²⁰

1
SEC. SLM Corporation Announces Separation
2
Student Loan Borrower Assistance. Checks Are Going Out to Student Loan Borrowers Harmed by Navient
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CourtListener. CFPB v. Navient Corporation Docket
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Student Borrower Protection Center. Navient Corporation Permanently Banned From Federal Student Loan Servicing Market
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CFPB. Payments to Harmed Consumers — Navient
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Yahoo Finance. Student Loan Borrowers Receive Checks
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New York Attorney General. Attorney General James Secures $1.85 Billion From Deceptive Student Loan Servicer
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Ohio Attorney General. Attorney General Yost Announces $1.85 Billion Settlement
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Navient AG Settlement. Navient AG Settlement
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Illinois Attorney General. Announces $1.85 Billion Settlement With Student Loan Servicer Navient
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California Attorney General. Attorney General Bonta Announces Multistate Settlement Against Student Loan Servicer
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U.S. Air Force. Sallie Mae Ordered to Pay $96.6M for Violating Troops’ Rights
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FDIC. Consent Orders Against Sallie Mae Bank and Navient Solutions
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Top Class Actions. Sallie Mae Reaches Class Action Settlement Over Collection Fees
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Top Class Actions. Sallie Mae Class Action Settlement Gets Final Approval
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Maryland General Assembly. Private Student Loan Testimony
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Student Borrower Protection Center. Statement on Navient Settlement With 39 States
18
Levi & Korsinsky. SLM Corporation AKA Sallie Mae Securities Class Action Lawsuit Filed
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Berger Montague. SLM Corporation Class Action Filing
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Tate Esq. Sallie Mae Student Loans