Sallie Mae is fined $97 million for charging excessive interest rates and late fees on military members’ student loans.
Troops are battling a new foe – unfair student loan charges.
Sallie Mae was reportedly whacked with $97 million in fines after it charged active-duty military personnel with excessively high interest rates and late fees on their government student loans. More than 60,000 service members were overcharged, dating back to 2005.
This is the first time the Justice Department has sued a student lender for violating the rights of military members. According to CBS News:
“We are sending a clear message to all lenders and servicers who would deprive our service members of the basic benefits and protections to which they are entitled: This type of conduct is more than just inappropriate; it is inexcusable,” Attorney General Eric Holder said at a news conference. “And it will not be tolerated.”
Federal law discounts student loan interest rates and caps them at 6 percent for active-duty service members, CNN Money said. Sallie Mae not only failed to discount the interest rates, Holder said, but it also made it difficult for military personnel to prove they were eligible for the discount.
Secretary of Education Arne Duncan said that in an effort to ensure that proving eligibility is no longer so challenging for service members, loan servicers like Sallie Mae will now be required to determine that the soldier qualifies for the lower interest rate, CNN Money says.
“We have streamlined the process so [military service members] can receive the loan interest rate without having to provide paperwork,” Duncan said. “It puts the onus on Sallie Mae instead of the soldier.”
About $60 million of the $97 million settlement will go to reimburse military members. The investigation was initially prompted by service member complaints to the Consumer Financial Protection Bureau. The matter was then referred to the Justice Department for investigation.
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