Normally student loan borrowers send their loan servicer payments to keep up with their debt. Come next month, it'll be the other way around for nearly 78,000 military veterans who will start receiving refund checks from Navient, the student loan servicing company that used to belong to Sallie Mae.
The Department of Justice announced Thursday that the $60 million in settlement funds that it secured from Navient last year will be mailed to veterans on June 12. Federal prosecutors alleged that the company cheated troops, and overcharged them interest during their military service, in violation of the Servicemembers Civil Relief Act (SCRA). The law sets a 6 percent cap on interest rates for debt that troops took on before their active duty begins.
The compensation checks will average about $771, but the individual payment amounts will range from $10 to over $100,000, the Justice Department said.
The announcement comes the same week the Department of Education cleared Navient, and three other major student loan servicers, in its own investigation of possible SCRA violations. The Education Department said that the companies complied with the law "in the vast majority of cases" between 2009 and 2014, and incorrectly denied troops the interest rate cap in only 1 percent of cases.
The Justice Department, by contrast, found that Navient forced 93 percent of active duty service members to pay too much.
Why the chasm between each department's findings? Well, it depends on how you count a violation of the law. According to the Chronicle of Higher Education, the Education Department, in its review looked to its old standard (since revised) of whether the service member had requested the rate cap in writing, and provided a copy of his or her military orders.
But the Justice Department expected Navient to be more proactive, "telling troops about the rate reduction when they requested other military benefits," the Chronicle explained.
Meanwhile, yet another regulator -- the Consumer Financial Protection Bureau -- recently launched a public inquiry into how student loan servicers operate, and whether the companies that guide borrowers in repaying more than $1 trillion in student debt are acting in borrowers' best interests.