Student lender Sallie Mae has agreed to pay $60 million to the federal government to resolve allegations it charged military service members excessive interest rates on their student loans, the Justice Department said Tuesday.
The deal settles a government lawsuit that asserted that the student loan giant violated the rights of service members by imposing interest rates above the 6% permitted by federal law and by improperly seeking default judgments against them. The lawsuit was the Justice Department's first against owners of student loans.
"We are sending a clear message to all lenders and servicers who would deprive our service members of the basic benefits and protections to which they are entitled. This type of conduct is more than just inappropriate; it is inexcusable," said Atty. Gen. Eric H. Holder Jr. "And it will not be tolerated."
Federal officials estimate that roughly 60,000 service members will be eligible for compensation as part of the settlement. An independent administrator will be assigned to distribute the reimbursements.
The settlement has been filed in federal court in Delaware and is awaiting a judge's approval. As part of the deal, Sallie Mae would also be required to ask the three major credit bureaus to delete negative credit histories that resulted from the overcharges.