Conflicting data on reports by two federal agencies suggest that the Department of Education missed thousands of violations by its student loan contractor Navient Corporation, which has been accused of intentionally overcharging veterans on their federal student loans.
Last month the Department of Justice announced that it would begin issuing refunds to nearly 78,000 veterans who had been overcharged on their student loans.
In a lawsuit settled against Navient in May 2014, DOJ accused the company of deliberately overcharging an originally estimated 60,000 active-duty service members on their federal and private student loans. The lawsuit alleged that Navient misled military personnel about the benefits under the Servicemembers Civil Relief Act (SCRA), and ignored their requests for a reduced interest rate.
The lawsuit prompted the Department of Education to investigate whether Navient complied with all Department regulations for granting interest rate caps under SCRA. The law, designed to relieve financial burdens for troops, was applied to federal student loans in 2008, and caps interest rates at 6 percent for loans that service members incur prior to going on active duty.
The investigation looked at a sample of 300 troops’ files and found only one service member that was overcharged, implying that Navient had likely only overcharged about 176 of the nearly 53,000 service members whose Education Department-owned loans the company serviced over the last five years.
Two days later, the Department of Justice released an update to its settlement with Navient, indicating that the company actually overcharged around 19,000 service members with government loans.
Navient Corp., formerly known as Sallie Mae, is the nation’s largest servicer of student loans. About half of its borrowers’ accounts are serviced for the Department of Education.
Federal sources interviewed by the Huffington Post said that the Education Department investigation of Navient was incomplete, neglecting to review recordings of calls between Navient representatives and service members, and therefore may have missed instances in which service members were illegally told that they were ineligible for the interest rate benefit.
