August 05, 2015

Murray, Warren, and Blumenthal Request Inspector General Examination of Education Department's Student Loan Servicers Compliance Review

Senators raise doubts about whether ED officials adequately reported results of their Servicemembers Civil Relief Act reviews

A copy of the letter is available here
A copy of the Warren staff report is available here

WASHINGTON, DC - Senate Health, Education, Labor and Pensions (HELP) Committee Ranking Member Patty Murray (D-Wash.), Senator Elizabeth Warren (D-Mass.), and Senator Richard Blumenthal (D-Conn.) today sent a letter to the Education Department's (ED) Office of Inspector General (OIG) requesting an examination of ED's recent reviews of student loan servicers' compliance with the Servicemembers Civil Relief Act (SCRA), which provides consumer protections to servicemembers while on active duty. In their letter, the senators raised concerns about the methodology used in the ED reviews and about whether Department officials adequately reported the results of the ED reviews to the public.

Just over a year ago, the Department of Justice (DOJ) and Federal Deposit Insurance Corporation (FDIC) reached a $100 million settlement with student loan servicer Sallie Mae, now known as Navient, for "intentional (and) willful violations of federal laws that capped servicemembers student loan interest rates." After this settlement, ED promised to conduct a "comprehensive" review of loan servicers' SCRA compliance. Upon releasing this review, ED officials stated that student loan borrowers were incorrectly denied the SCRA-mandated interest rate cap in "less than 1 percent of cases," and as a result, took no action against the loan servicers. However, the review included only a small number of samples and a small subset of the types of SCRA violations previously identified by DOJ and FDIC, and actually revealed a high number of servicer errors.

"The small number of cases reviewed is quite extraordinary, considering newly released data from a recent DOJ and FDIC investigation concluding that Navient alone denied appropriate SCRA relief to more than 75,000 federal and private loan borrowers," the senators wrote in the letter. "In other words, the Department of Education based its conclusion on an examination of a tiny fraction of the relevant cases. Moreover, the ED reviews identified high error rates in the small number of cases included in the reviews...Finally, the description of the findings from the ED reviews by ED officials did not provide appropriate context and failed to fully describe to the findings of the report to the public and the press."

The senators' letter to the ED OIG concludes, "Given the numerous problems identified with these reviews and the deeply flawed descriptions that ED officials used to present their findings, we request that you conduct your own independent assessment of the adequacy and accuracy of the review process."

A report by Senator Warren's staff identifying numerous problems with the ED review is available here. The HELP Committee's oversight into this matter is ongoing.

Full text of the senators' letter is available here.