Sallie Mae has reached a $60 million settlement to resolve allegations it overcharged members of the military for student loans, the Justice Department said today.
The U.S. accused the lender of failing to provide members of the military a 6 percent interest rate cap on student loans. The practice dated back to at least 2005 and an estimated 60,000 service members will be eligible to receive compensation under terms the settlement, the Justice Department said.
“Federal law protects our service members from having to repay loans under terms that are unaffordable or unfair,” Attorney General Eric Holder said in a statement. “That is the least we owe our brave servicemembers who make such great sacrifices for us. But as alleged, the student lender Sallie Mae (SLM:US) sidestepped this requirement by charging excessive rates to borrowers who filed documents proving they were members of the U.S. military.”
The settlement was announced by Holder and Education Secretary Arne Duncan and is subject to a court approval.
The settlement covers Sallie Mae’s entire portfolio of student loans, including private student loans, direct Department of Education loans and student loans that originated under the Federal Family Education Loan Program, the Justice Department said.
As part of the settlement, Sallie Mae agreed to tell three credit bureaus to delete information from credit histories caused by overcharges, the Justice Department said. It will also be required to “streamline the process by which servicemembers may notify” Sallie Mae of their eligibility for benefits.
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