Sallie Mae to Pay Fine Over Loans to Military Servicemembers

Student lender Sallie Mae and Navient, a former loan servicing unit of Sallie Mae, have agreed to pay $97 million to settle allegations by federal regulators that military service members were charged excessive interest and fees on student loans, reports The New York Times.

The U.S. Justice Department said that beginning in 2005, the companies failed to cap interest on loans to military personnel at 6 percent, a limit they are entitled to under the Servicemembers Civil Relief Act. The department also said the companies improperly obtained default judgments against service members, the Times reported. Another complaint, by the Federal Deposit Insurance Corporation (FDIC), said the companies improperly advised service members about loan requirements and applied payments in a way that maximized late fees.

The FDIC settlement requires the companies to pay $6.6 million in civil penalties, as well as $30 million in restitution to victims. Under the Justice Department settlement, the companies will pay $60 million to 60,000 service members and a $55,000 civil penalty.


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The New York Times