Earlier today, federal regulators ordered Sallie Mae to pay $96.6 million in penalties and restitution to student loan borrowers harmed by the company’s lending practices. Sallie Mae agreed to settlements with both the U.S. Department of Justice (USDOJ) and the Federal Deposit Insurance Corp (FDIC) for violations of the following laws:
- The Servicemembers Civil Relief Act (SCRA), which protects active-duty military personnel against interest rate overcharges
- The Federal Trade Commission Act, which prohibits unfair and deceptive practices in loan billing and payment processing
- The Equal Credit Opportunity Act, which bans discriminatory lending conduct
The settlement was reached following several separate federal investigations, which found that Sallie Mae had overcharged, mischarged or discriminated against more than 60,000 active duty service members on their loans. Investigators found violations in both Sallie Mae’s private and federal student loan administration dating back to 2005. These violations put Sallie Mae’s federal loan servicing contract with the U.S. Department of Education in jeopardy. According to that contract, servicers are “required to meet all statutory and legislative requirements.”
Under the settlement with the USDOJ, the nation’s largest private loan company will pay $60 million to compensate servicemembers on top of a civil penalty of $55,000. In the settlement with the FDIC, Sallie Mae will pay approximately $30 million to affected borrowers, as well civil penalties totaling $6.6 million.
Today’s sanctions mark the most serious penalties ever levied on a Department of Education contractor. At a press conference held today at the Department of Justice to announce the settlements, Secretary of Education Arne Duncan said, “Every student should have peace of mind that they can get the benefits they’re entitled to.”
Last week, Secretary Duncan testified before the Senate HELP Committee that his agency would also conduct a formal investigation of Sallie Mae’s practices. Sallie Mae’s multimillion dollar servicing contract with the Department of Education is up for renewal next month. Today’s rulings and increased pressure from Democratic senators for the Department of Education to strengthen oversight of its contractors call into question the future of the company’s lucrative government contract.
Does this also apply to non military that have student loans that are being paid on. My son is paying a student loan for sallie mae for his 1 year of ITT Tech schooling, and it is outragious. I truly believe he is being overcharged and a serious reduction is in order. HOW do we find out about this?
That is also my question. I can’t find any information on it.
My son has the same problem with Sallie Mae, The loan when he was in school was 29,400.00 dollars he was charged 18% interest, in 2007, the payment was almost $800 month. He was making about $10 an hour after his schooling and could not make the payment. He tried to give them what he could and the harassed him endlessly. He was so distraught that I was fearful for his future. In 2010 because of late fees and penalties, this balance went to $56,000.00. I had a loan with Sallie Mae in 1997 and my payments on $16,000 was $156. a month. What has happened to fair loan is criminal. What can he do to have this investigative group look into his situation?