Student loans are already bad enough, but the interest rates are what kills most graduates trying to pay it all back. With interest rates capped at 6 percen for military members, it's not as bad as it could be. Unfortunately for some, their interest rates were not capped at the federal maximum. For those suffering under the burden of high interest rates, you might soon have a refund check on the way.
The Justice Department announced today that it has reached a settlement with Sallie Mae that will see the loan provider refunding $60 million to military members that were paying more than the maximum 6 percent interest under federal law. Under the settlement, some 60,000 service members will receive a refund check from Sallie Mae. Don't go counting your money just yet though as the settlement has only been brought before a federal court. That being said, the court is pretty much guaranteed to approve the settlement as Sallie Mae would like to have the matter settled as soon as possible.
According to the Department of Justice, Sallie Mae has been charging more than the federal maximum of six percent for service members since 2005. The Department also says that Sallie Mae improperly obtained default judgments against servicemembers during that time.
To help set things right, the Department of Justice didn't just request a refund. The settlement requires Sallie Mae to have all three major credit bureaus delete negative credit caused by its charging of high interest rates and default judgments. It must also streamline the process that servicemembers use to request benefits under the SCRA.
“Federal law protects our servicemembers from having to repay loans under terms that are unaffordable or unfair,” said Attorney General Eric Holder. “That is the least we owe our brave servicemembers who make such great sacrifices for us. But as alleged, the student lender Sallie Mae sidestepped this requirement by charging excessive rates to borrowers who filed documents proving they were members of the U.S. military. By requiring Sallie Mae to compensate its victims, we are sending a clear message to all lenders and servicers who would deprive our servicemembers of the basic benefits and protections to which they are entitled: this type of conduct is more than just inappropriate; it is inexcusable. And it will not be tolerated.”
If you are a servicemember affected by this settlement, you won't have to do much. The government is putting together a group that will identify those affected by Sallie Mae's actions and get the refund to you. There's no information available just yet, but the government says it will have a Web site up when it's able to start distributing refunds to those affected.
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