Advertisement

You will be redirected to the page you want to view in  seconds.

Service members allegedly were cheated on student loans

May. 13, 2014 - 06:00AM   |  
  • Filed Under

WASHINGTON — Federal authorities announced a proposed $60 million settlement Tuesday in a lawsuit alleging that thousands of military service members were charged excessive interest rates for student loans.

The legal action, the first of its kind filed against student loan owners and processors for alleged violations of the Servicemembers Civil Relief Act, involves about 60,000 service members who were charged rates in excess of the maximum 6 percent.

Attorney General Eric Holder and Education Secretary Arne Duncan said the settlement involving Sallie Mae, now known as Navient, awaits approval by a federal judge in Delaware.

Holder said the loaners engaged in “a nationwide practice” for nearly a decade that failed to provide military members the 6 percent rate.

“This alleged overcharging appears to have been the rule, rather than the exception,” Holder said. “According to an audit, excessive rates were charged to 93 percent of active-duty service members who had loans owned or serviced by Sallie Mae.”

If approved, proceeds of the settlement would be distributed among the 60,000 members.

The government alleged that the loaners improperly obtained default judgments against service members who were protected under the Civil Relief Act.

As a result, the terms of the proposed deal require loaners to request that credit agencies delete any negative entries based on the interest overcharges and default judgments.

“This type of conduct is more than just inappropriate,” Holder said. “It is inexcusable. And it will not be tolerated.”

Holder said loaners cooperated with the inquiry and endorsed the settlement proposal.

“We offer our sincere apologies to the servicemen and servicewomen who were affected by our processing errors and thus did not receive the full benefits they deserve,” Navient President John Remondi said. “Over the past several years, we have implemented changes in our procedures and training programs to prevent these mistakes from happening again.”

“We regret any inconvenience or hardship that our customers may have experienced,” Sallie Mae Bank said in a statement. “Initiatives are underway to prevent such errors from recurring and apply the clear regulatory guidance these orders now provide.”

Answers by RallyPoint

Join trending discussions in the military's #1 professional community. See what members like yourself have to say from across the DoD.

More In News

Start your day with a roundup of top defense news.

VA Home Loan
Rates

Search By:

Product Options:
Zip Code:

News for your in-box

Sign up now for free Military Times E-Reports. Choose from Money and Education. Subscribers: log in for premium e-newsletters.


This Week's Army Times

This Week's Army Times

Warrant officers wanted
Make this career move, get promoted and get paid

Subscribe for Print or Digital delivery today!

Classifieds
MilitaryTimes Green Trusted Classifieds Looking to buy, sell and connect on Military Times?
Browse expanded listings across hundreds of military installations.
Faces of valorHonoring those who fought and died in Operations Iraqi Freedom and Enduring Freedom.
hall of valorThe Hall of Valor is a searchable database of valor award citations collected by Doug Sterner, a Vietnam veteran and Military Times contributing editor, and by Military Times staff.
Woman who cried rape
(3 replies)
   Last Post: TJMAC77SP
        May 3, 2014 1:32 PM
   Last Post: garhkal
        May 1, 2014 5:03 PM
Cliven Bundy
(45 replies)
   Last Post: Chief_KO
        Apr 26, 2014 9:49 AM
Handbooks

All you need to know about your military benefits.

Benefits handbook

Guard & Reserve All you need to know about the Guard & Reserve.

guard and reserve handbook