Nearly 78,000 U.S. military members will receive $60 million in total settlement payouts from Navient Corp., a student loan servicer formerly part of Sallie Mae, for charging active duty service members excessive interest on their private and federal education loans. Navient and the Department of Justice reached the settlement in May 2014, but the DOJ just announced the payments, which will begin in June. Sallie Mae and Navient entered into the settlement agreement without admitting any wrongdoing.
The checks will range from $10 to more than $100,000, averaging $771, and will be mailed June 12, according to a news release from the DOJ. Navient must also pay a $55,000 civil penalty and request the three major credit reporting agencies (Equifax, Experian and TransUnion) remove negative trade lines on borrowers’ credit histories that came about because of the “interest rate overcharges and improper default judgments,” the news release says. That could potentially make a big difference in the credit standings and overall financial health of those affected. Additionally, Navient was ordered to improve the process by which it notifies military personnel of their eligibility for Servicemember Civil Relief Act benefits.
Under the SCRA, student loans made to members of the U.S. armed forces are subject to a 6% cap, and Navient was accused of charging service members higher rates, therefore violating the SCRA.
“A key issue in the matter was the documentation needed to qualify for SCRA benefits,” wrote Patricia Christel, vice president of corporate communications for Navient, in an email statement to Credit.com. “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 statute and previous guidance from the Department of Education and other government agencies.”
In a review of servicers’ compliance with the SCRA, the Department of Education found that borrowers were denied the 6% interest rate cap less than 1% of the time. The review included the four major student loan servicers: Navient, Great Lakes, Nelnet and PHEAA.
Since this settlement, the Department of Education streamlined the process for getting active duty military access to the lower interest rates. It is working with a Department of Defense database to identify military personnel who qualify for lower interest rates under SCRA, rather than leaving it to service members to apply, as they previously were. Starting June 12, service members can call (855) 382-6421 if they have questions about their eligibility for monetary relief. Consumers are entitled to a free annual credit report from each of the three major credit reporting agencies through AnnualCreditReport.com to check for errors or any other issues. You can also get a free credit report summary from Credit.com, which is updated monthly so you can watch for important changes.
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This article originally appeared on Credit.com.
This article by Christine DiGangi was distributed by the Personal Finance Syndication Network.