Democratic senators hit out at the Department of Education for exonerating a suspect student loan giant that does billions in business with the federal government.
Sens. Elizabeth Warren (D-Mass.), Richard Blumenthal (D-Conn.) and Patty Murray (D-Wash.) on Tuesday called the investigation that led to the department’s rosy findings on Navient “quite extraordinary,” noting its scope paled in comparison to prior federal probes of the company that last year led to heavy fines and refunds.
The trio made the charges in a letter to the department’s office of inspector general, calling on it to conduct an “independent assessment of the adequacy and accuracy of the review process.”
“Despite the DOJ and FDIC findings and the significant settlement, ED took no action against Navient, instead announcing it would consider acting after a ‘thorough review,’” a report published by Sen. Warren’s office noted, quoting Education Secretary Arne Duncan. “But, within a month, ED extended Navient’s $100 million-plus contract. A year later, in May 2015, ED released the results of the agency review.”
The former Sallie Mae arm had been found by the Justice Department and Federal Deposit Insurance Corporation to have violated laws capping interest rates charged to members of the military at 6 percent. In May 2014, it was forced to pay $139 million in fines and to settle claims at the heart of those findings.
But while the two agencies discovered 75,000 violations by Navient under the Servicemembers Civil Relief Act, the Department of Education only analyzed 14 cases of denials for interest rate ceilings, the trio claimed.
That review, Warren’s staff noted, concluded that borrowers were incorrectly denied proper treatment under laws protecting servicemembers “in less than 1 percent of cases.”
“This claim is deeply flawed and may have misled the public and the media,” they noted, adding that department officials calculated the figure by including “SCRA-eligible borrowers who did not ask for – and therefore, under ED’s standard of review, could not have been incorrectly denied – rate reductions.”
According to the publicly-traded company’s annual report, Navient last year held “the largest portfolio of education loans insured or guaranteed under the Federal Family Education Loan Program.”
“Navient’s $104.5 billion portfolio of FFELP Loans bears a maximum 3 percent loss exposure due to the federal guarantee,” the report said.
Read the letter from Sens. Warren, Blumenthal, and Murray to the Department of Education IG here. Read Sen. Warren’s office’s report on the Department of Education Navient investigation here.
