Sallie Mae, Navient Reach Student-Loan Settlement With U.S. Government; Firms to Pay Combined $97 Million to Settle Charges of Overcharging Military Members, Excessive Fees
WASHINGTON--Two of the biggest companies in the student-loan market agreed on Tuesday to pay a combined $97 million to settle federal charges they overcharged military members and imposed excessive fees for student loans.</br></br>The government accused Sallie Mae, formally known as SLM Corp., and the new owner of its loan-servicing business, Navient Corp., of violating a federal law that caps loan interest rates at 6% for military members. The Justice Department and Federal Deposit Insurance Corp. alleged the companies charged 60,000 service members interest rates that exceeded the cap, resulting in hundreds of dollars in excess interest charges.</br></br>The government said the companies also maximized late fees and failed to adequately disclose how consumers could avoid the fees. In settling the charges, the companies didn't admit or deny the allegations.</br></br>Federal and state scrutiny of the nearly $1.2 trillion student-loan industry has increased. On Tuesday, Education Secretary Arne Duncan said at a news conference that his agency is reviewing whether Navient violated the terms of its contract to manage payments on federal student loans. Asked whether the company's contract could be terminated if violations are found, Mr. Duncan said: "Everything's on the table."</br></br>Democrats on Capitol Hill have questioned whether Navient should retain its contract to collect payments for the Education Department, which makes the bulk of student loans.