U.S. Department of Education Completes Review of Major Student Loan Servicers

Archived Information

U.S. Department of Education Completes Review of Major Student Loan Servicers

Department Takes Action to Improve Outreach to Borrowers on Active Military Duty
May 26, 2015
Note (3/1/16): On Feb. 29, 2016, the Department of Education’s Office of Inspector General (OIG) issued a report raising concerns about the methodology cited in the press release below that led to the calculation that “in less than 1 percent of cases, borrowers were incorrectly denied the 6 percent interest rate cap required by the laws.” The Department takes very seriously OIG’s feedback and its responsibility to protect borrowers, especially those who serve their country in uniform. To view the methodology and calculations in full, please click here for the full servicer compliance reports.

As a part of the Obama Administration's commitment to protect student loan borrowers, the U.S. Department of Education conducted thorough reviews of the four major federal student loan servicers to ensure that the companies followed federal law when it comes to loan interest rates for active-duty servicemembers.

The reviews by the Department found that the four servicers - Navient, Great Lakes, PHEAA and Nelnet – complied in the vast majority of cases with the Servicemembers Civil Relief Act (SCRA) as required by the Higher Education Act (HEA). The reviews, which looked at active-duty servicemembers' SCRA eligibility between 2009 and 2014, show that in less than 1 percent of cases, borrowers were incorrectly denied the 6 percent interest rate cap required by the laws.

"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," said Under Secretary Ted Mitchell. "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 Department streamlined the process for servicemembers so that their loan rates are adjusted when they are called to active duty. So far, more than 141,000 men and women in uniform have benefitted. Prior to this change, servicemembers had to apply for the lower interest rate and provide proof of active duty status.

In addition to taking these steps that improve customer service for active-duty military borrowers, the Department is also expanding its review of compliance with the SCRA and HEA to the Department's seven non-profit servicers as well as commercial Family Federal Education Loan (FFEL) servicers. These reviews are expected to be completed later this year.

Last year, with the support of the Education Department, the Department of Justice (DOJ) announced a $60 million settlement agreement with Navient after concluding the company had improperly denied active duty military members SCRA benefits. DOJ's investigation reviewed all of Navient's student lending and servicing activities, including its private student loans, FFEL program loans and federal direct student loans.

"We are pleased that the Department of Justice was able to do a review with a much wider scope than the Education Department's loan portfolio to ensure greater accountability for our men and women in uniform," Mitchell said. "This ensures that no matter where servicemembers get student loans, they will receive the benefit to which they are entitled under the law."

More information on assistance for active-duty borrowers can be found on the Department's website at http://studentaid.ed.gov.

The Office of Federal Student Aid administers and oversees the federal student financial assistance programs, authorized under Title IV of the Higher Education Act of 1965. These programs represent the largest source of student aid for postsecondary education in the United States. The Office of the Under Secretary manages policies, programs, and activities related to postsecondary education.