Nearly 78,000 Service Members to Begin Receiving $60 Million Under Department of Justice Settlement with Navient for Overcharging on Student Loans
The Department of Justice announced today that this June, 77,795 service members will begin receiving $60 million in compensation for having been charged excess interest on their student loans by Navient Corp., the student loan servicer formerly part of Sallie Mae. The payments are required by a settlement that the department reached with Navient last year to resolve the federal government’s first ever lawsuit filed against owners and servicers of student loans for violating the rights of service members eligible for benefits and protections under the Servicemembers Civil Relief Act (SCRA). The United States’ complaint in that lawsuit alleged that three defendants (collectively Navient) engaged in a nationwide pattern or practice, dating as far back as 2005, of violating the SCRA by failing to provide members of the military the 6 percent interest rate cap to which they were entitled for loans that were incurred before the military service began. The three defendants are Navient Solutions Inc. (formerly known as Sallie Mae, Inc.), Navient DE Corporation (formerly known as SLM DE Corporation), and Sallie Mae Bank.
The settlement covers the entire portfolio of student loans serviced by, or on behalf of, Navient. This includes private student loans, Direct Department of Education Loans, and student loans that originated under the Federal Family Education Loan (FFEL) Program. Approximately 74 percent of the $60 million that is about to be distributed is attributable to private loans, 21 percent to loans guaranteed by the Department of Education and five percent to loans owned by the Department of Education.
The checks, which are scheduled to be mailed on June 12, 2015, will range from $10 to over $100,000, with an average of about $771. Check amounts will depend on how long the interest rate exceeded 6 percent and by how much, and on the types of military documentation the service member provided.
In addition to the $60 million in compensation, the settlement contains several other key provisions. It required Navient to pay the United States a civil penalty of $55,000. Navient must also request that all three major credit bureaus delete negative credit history entries caused by the interest rate overcharges and improper default judgments.
The settlement also required Navient to streamline the process by which service members may notify Navient of their eligibility for SCRA benefits. The revised process includes an SCRA online intake form for service members, and the availability of customer service representatives specially trained on the rights of those in military service.
“This compensation will provide much deserved financial relief to the nearly 78,000 men and women who were forced to pay more for their student loans than is required under the Servicemembers Civil Relief Act,” said Acting Associate Attorney General Stuart F. Delery. “The Department of Justice will continue using every tool at our disposal to protect the men and women who serve in the Armed Forces from unjust actions and illegal burdens.”
“We are pleased about how quickly we will be able to get this money back into the hands of the service members who were overcharged on their student loans while they were in military service,” said Principal Deputy Assistant Attorney General Vanita Gupta of the Civil Rights Division. “The department will continue to actively protect our service members and their families from such unjust actions.”
The department’s investigation of Navient was the result of a referral of service member complaints from the Consumer Financial Protection Bureau’s Office of Servicemember Affairs, headed by Holly Petraeus. The Department of Justice worked closely with the department of Education during the investigation to ensure that aggrieved service members with federally owned and federally guaranteed student loans would be fully compensated, and be able to receive the SCRA benefit of a reduced 6 percent interest rate through a streamlined process going forward. The Department of Education is now using a U.S. Department of Defense database to proactively identify borrowers who may be eligible for the lower interest rate under the SCRA, rather than requiring service members to apply for the benefit.
Beginning on June 12, service members with questions about their eligibility for monetary relief under the settlement should call (855) 382-6421. Other service members and their dependents who believe that their SCRA rights have been violated should contact an Armed Forces Legal Assistance office. To find the closest office, consult the military legal assistance office locator at http://legalassistance.law.af.mil and click on the Legal Services Locator. Additional information about the Justice Department’s enforcement of the SCRA and the other laws protecting service members is available at www.servicemembers.gov.