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May 15, 2014

Sallie Mae to Pay $97 Million Fine for Overcharging Troops

As some of you may know, in addition to being Heather's Communications Director (and husband), I am also a retired U.S. Marine Corps officer, so this story hits a little close to home.  Sallie Mae and Navient, previously a 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, according to an article by Tara Siegel Bernard in Tuesday's New York Times.  

The U.S. Justice Department said on Tuesday that beginning in 2005, the companies failed to cap interest on loans to military personnel at 6 percent — a ceiling they are entitled to as part of the Servicemembers Civil Relief Act. The department also asserted that the companies improperly obtained default judgments against service members.

In addition to the excessive interest and fees that the lender charged service members, the lender misled numerous service members by advising them that they did not qualify for benefits under the Servicemembers Civil Relief Act unless they were currently deployed, according a related statement by the Federal Deposit Insurance Corporation.

Thanks to the Post 9/11 GI Bill and it's predecessor, the Montgomery GI Bill, millions of service members have been able to advance their education, earn degrees, and re-enter civilian life with the tools necessary to compete in today's competitive job market.  Unfortunately many service members, especially young enlisted troops, have taken out student loans and gotten burned by unscrupulous practices such as those penalized above.  Holding Sallie Mae and other private lenders accountable for following the law is certainly a step in the right direction.

To read the New York Times article about Sallie Mae's fine, click here.

Semper Fidelis!

James D. Jarvis
Major, U.S. Marine Corps (Retired) 

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