Education Department misled public about investigation of loan servicers, says watchdog
The Education Department conducted a deeply flawed review of its student loan servicers, the middlemen who collect and apply payments to debt, and knowingly misled the public about the findings, according to a report released Tuesday by the agency’s inspector general.
The charges being leveled against the department stem from an audit administered after the Justice Department fined student loan servicer Navient Solutions $60 million in 2014 for unlawfully charging active-duty service members high interest rates on student loans. To ensure the violations were not widespread, then-Education Secretary Arne Duncan pledged to review all loan servicers’ records and later said there was little evidence of any wrongdoing.
Tuesday’s report rebuts those claims and paints the department’s investigation as shortsighted and inaccurate. The inspector general said the agency used an inadequate sample of loans to draw conclusions about whether its four largest servicers — Navient, Great Lakes, Nelnet and American Education Services — were complying with a law that caps interest rates for active-duty troops at 6 percent. Few of the borrowers requested the military benefit, and even fewer were eligible. What’s more, the department failed to remove duplicate records and exclude loans in military deferment or grace period with an interest rate of 6 percent or less.
In the case of Navient, the department said the servicer correctly granted interest-rate requests from 10 active-duty borrowers, but it turns out that three of those approvals occurred outside the scope of the review period, from 2009 to 2014. None of the four main servicers were required to review their portfolio of loans to identify and correct all potential cases of incorrect denials, according to the report.
Despite knowing the limitations of its review, the Education Department declared that less than 1 percent of the troops’ files it reviewed contained violations of the Servicemembers Civil Relief Act (SCRA). The inspector general called the May 2015 news release announcing the findings “unsupported and inaccurate.”
When the department’s findings were released, lawmakers were suspicious of the near-clean bill of health given to the loan servicers. Democratic Sens. Elizabeth Warren of Massachusetts, Patty Murray of Washington and Richard Education Department misled public about investigation of loan servicers, says watchdog - The Washington Post:
