Thousands of Troops Will Receive Compensation for Student Loan Overcharge

Thousands of service members will start receiving checks of up to $100,000 in June to compensate them for improper overcharges on their student loans, the Justice Department announced.

The federal government sued student loan manager Navient Solutions for allegedly violating the Service Members Civil Relief Act over the past decade by charging troops more than the 6 percent cap on interest rates mandated by the law. The law limits to 6 percent the interest charged to service members on debt, including student loans, incurred before military service. Navient used to be part of Sallie Mae, which is also part of the settlement.

Nearly 78,000 service members will receive checks ranging from $10 to $100,000, with an average payout of $771, Justice said. The checks will be mailed out on June 12. “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,” a department press release stated.

The $60 million settlement, reached in 2014, covers all the loans Navient manages, including private student loans, Education Department loans, and loans originating under the Federal Family Education Loan program.

“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 Justice’s civil rights division. “The department will continue to actively protect our service members and their families from such unjust actions.” The Consumer Financial Protection Bureau referred complaints from service members to the Justice Department, which then launched its investigation.

The settlement also requires the company to pay the government a $55,000 civil penalty, and inform the three credit bureaus to delete any negative credit history of service members caused by the overcharges.

The complaint alleged that Navient “engaged in a nationwide pattern or practice” of overcharging service members. Navient denied any wrongdoing, but took responsibility for the errors. “The largest group of customers receiving compensation are service members who had not provided a written request and copy of orders calling the service member to active duty, as required by the SCRA and previous guidance from the Department of Education and other government agencies,” said Patricia Nash Christel, Navient vice president of corporate communications, in an email.

A separate investigation by the Education Department this week concluded that four loan servicing providers, including Navient, complied in the “vast majority” of SCRA cases. “The reviews, which looked at active-duty service members' SCRA eligibility between 2009 and 2014, show that in less than 1 percent of cases, borrowers were incorrectly denied the 6 percent interest rate cap required by the laws,” said a department press release.

Navient has streamlined the process for service members to document SCRA eligibility to avoid future mistakes. After the settlement last year, and in response to calls for more flexibility, Education issued new guidance to loan servicers reducing the documentation that military personnel have to provide to obtain SCRA benefits.

“We demonstrate our appreciation for the service of our service member customers through streamlined access to benefits, information and assistance,” said Navient President and CEO Jack Remondi in a statement. “We appreciate that the regulators agreed on consistent guidance and an enhanced process, thereby enabling us to offer SCRA benefits to even more service members.”

Military personnel wondering if they are eligible for compensation under the settlement can call 1-855-382-6421 for more information.

(Image via zimmytws / Shutterstock.com)