Navient Corp., a major servicer of student loans, has been formally cleared of wrongdoing by the U.S. Department of Education after being accused of cheating active military on federal student loans. A spokeswoman from the Education Department, Dorie Nolt, said that Navient will continue in its contract to collect monthly student loan payments.
For the past year, the Department of Education has been investigating the four largest federal student loan servicers (Navient, Great Lakes, PHEAA, and Nelnet) to make sure that they have been doing right by active-duty members of the military. The investigation came after the Justice Department fined Navient $60 million for charging service members more than the 6% interest promised to them by law. Education Secretary Arne Duncan said at the time that the department would investigate all its loan servicers to try to stem the problem. The investigation into seven other nonprofit servicers continues.
Danielle Douglas-Gabriel of the Washington Post quotes Undersecretary Ted Mitchell on the Department’s concern over the treatment of active-duty military:
For all of the sacrifices they have made on behalf of our country, our brave service members have the right to the benefits provided to them under federal law and should not be subjected to additional red tape to manage their student loans. What’s more, every student who has taken out a federal student loan should have the peace of mind that the Education Department’s servicers are following the law and treating all borrowers fairly.
The Imperial Valley News writes that the Department of Education also streamlined the process of receiving these reduced loan rates: when someone enters active duty, their loans are adjusted automatically, when previously they had to apply and send proof of their status.
Earlier investigations of Navient came to different conclusions, writes Shahien Nasiripour of the Huffington Post. The Justice Department sued Navient in May of 2014 after coming to the conclusion that they overcharged troops and denied them rights under the Servicemembers Civil Relief Act. Federal prosecutors stated that their actions were “intentional, willful, and taken in disregard for the rights of servicemembers.”
A federal bank regulator, the Federal Deposit Insurance Corp., also found Navient guilty of “unfair or deceptive acts or practices” that violated the Federal Trade Commission Act for telling service members that they wouldn’t receive benefits unless they were deployed.
The Education Department, however, found that they were more likely to provide troops with extra benefits that they weren’t entitled to rather than to deny them benefits. The department reviewed 23 cases, and just one person was denied rights that they deserved, and six had reduced interest rates even though they weren’t technically entitled to that benefit.
This appears to be a result of different expectations for the corporations between departments, notes Kelly Field of the Chronicle. The Department of Justice took issue with Navient’s habit of not telling borrowers about the reduced rate when they applied for other military benefits, whereas the Department of Education only counted requests that had been submitted formally as per the old policy.