NEW YORK (MainStreet) On the heels of private student loan giant Sallie Mae's settlement with the Justice Department for charging excessive interest rates to military customers, Senator Dick Durbin (D-IL), author of the Student Loan Borrower Bill of Rights Act, asked the nation's student loan servicers to ensure that those in uniform can get the benefits that they have earned and the protections to which they are entitled.
Durbin has also introduced legislation to fix a provision in the 1940 Servicemembers Civil Relief Act (SCRA), which predates the original GI Bill by four years. That provision unintentionally discourages members of the armed forces from consolidating or refinancing student loans that were taken out before joining the military.
The $60 million settlement with the Justice Department resolves allegations that Sallie Mae charged military customers excessive interest rates on their student loans by improperly seeking loan defaults judgments.
Separately, the Federal Deposit Insurance Corp. announced a settlement of $30 million in restitution from allegations that Sallie Mae maximized consumer late fees. Sallie Mae will also pay $6.6 million in civil penalties.
The Justice Department's lawsuit was the first against a lender and servicer of student loans for violating the rights of military personnel. The settlement has been filed in a federal court in Delaware and is awaiting a judge's approval. Federal officials estimate that some 60,000 service members will be eligible for compensation as part of the settlement.
"We are sending a clear message to all lenders and servicers who would deprive our service members of the basic benefits and protections to which they are entitled," said Attorney General Eric Holder at a news conference this week. "This type of conduct is more than just inappropriate, it is inexcusable. And it will not be tolerated."