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Student loan servicer Sallie Mae and formerly affiliated companies have agreed to pay a total of $97 million to settle claims that it charged members of the military too much interest on their loans — and the Education Department will review whether additional federal action, including termination of its contract with Sallie Mae, is necessary.
The Justice and Education departments on Tuesday announced a $60 million settlement with Sallie Mae and related companies, and the Federal Deposit Insurance Corp. announced a separate $37 million settlement with Sallie Mae Bank and Navient Solutions, Inc., over deceptive lending practices and violations of the Servicemembers Civil Relief Act.
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The Justice Department estimates that about 60,000 servicemembers will split the $60 million. The agency’s complaint alleges that Sallie Mae violated the law widely and as far back as 2005 by failing to provide members of the military the 6 percent interest rate cap they were entitled to. Until an April 30 split, Navient serviced loans for Sallie Mae.
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“The intent of this law is to ensure that our service members are not stuck repaying loans under terms that are unaffordable or unfair. That is the least we owe our brave service members who make such great sacrifices for us,” Holder said at a press conference, “But as alleged, the student lender Sallie Mae sidestepped this requirement by charging excessive rates to borrowers who filed documents proving they were members of the U.S. military.”
Justice and Education also hope to send a message to other lenders and loan servicers, Holder said. “This type of conduct is more than just inappropriate; it is inexcusable. And it will not be tolerated.”
However, Navient said in a statement that the Justice Department is acting inconsistently with previous regulations.
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