The Department of Education made “unsupported and inaccurate” findings last year about its loan servicers’ compliance with laws designed to protect active-duty members of the US military.
The May 2015 claims–which stated only 1 percent of servicemembers were incorrectly denied interest rate caps–were based on flawed surveys and illogical conclusions, the department’s inspector general said on Tuesday.
The watchdog noted that an 8 percent “incorrect denial rate” would have been more accurate for the department to report, based on its own data. But it said that the department’s survey methodology was so shoddy that “it was not appropriate to report an aggregate incorrect denial rate” at all.
The department works with four loan servicers to administrate student loans: Navient (formerly Sally Mae), Pennsylvania Higher Education Assistance Authority, Great Lakes, and Nelnet.
In 2014, then-Secretary of Education Arne Duncan ordered a probe into the practices of all four servicers, after the Department of Justice alleged Navient wasn’t complying with Servicemembers Civil Relief Act (SCRA) rules on usury. The SCRA puts a 6 percent ceiling on interest rates for active-duty soldiers, for loans they have taken out prior to joining the military.
The inspector general also noted that although the studies were crafted “to provide information on areas of noncompliance for management to address through corrective actions,” the Department of Education has decided to take none whatsoever since being notified of its erroneous conclusion.
“In response to the results of our review, the Department stated that it was a management decision to not require further corrective actions for periods reviewed due to limited servicing errors identified and that the decision was not primarily based on a statistical analysis,” the IG said.
The department’s internal auditors launched their inquiry into loan servicers’ SCRA compliance in August, after Sens. Elizabeth Warren (D-Mass.), Patty Murray (D-Wash.), and Richard Blumenthal (D-Conn.) lodged a complaint about the May 2015 findings.
“Today’s report is a stunning indictment of the Department of Education’s oversight of student loan servicers, exposing the extraordinary lengths to which the Department will go to protect these companies when they break the law,” Warren said Tuesday.
Late last year, Warren, Blumenthal and Sen. Dick Durbin (D-Ill.) accused the Departments of Education and Justice of making a sweetheart deal with the Education Management Corporation–a for-profit college that had been accused of selling worthless degrees at the expense of students and taxpayers.
Blumenthal said Tuesday that the IG revealed a “shameful abdication of responsibility by the Department of Education.” Murray said it showed that department “papered over mistreatment of military borrowers.”
“Years later, this problem has not been fixed,” she added.
