Navient Corp, a spin-off company from Sallie Mae, will receive newly overhauled student lending contracts from the Department of Education, despite accusations of ripping off tens of thousands of U.S. veterans.
Department of Education has been under criticism for its policies on student lending. Its oversight of companies that provide student loans, like Sallie Mae, has been too relaxed according to some sources. Now the department has announced that it will be making major changes to its policies and overhauling its contracts. Unfortunately, one of the biggest symbols of lending misconduct is being rewarded with a new contract according to the Huffington Post.
Sallie Mae and Navient made the headlines in May of this year when the FDIC accused them of intentionally overcharging active-duty service members, and going out of its way to get default judgments, starting in 2005. Among the specific allegations was that Sallie Mae was illegally misinforming troops they had to be deployed to get certain benefits and concocting other fake tests. Navient Corporation and Sallie Mae made a settlement with the Department of Justice for a combined $139 million dollars to resolve the accusations.
As part of the settlement, neither Navient or Sallie Mae admitted any guilt, a common practice for financial firms settling with the government. On May 1st, Navient spun-off from Sallie Mae, taking over all student lending. Sallie Mae still functions as a bank and Navient handles about 5.8 million student loan accounts.
Unnamed sources have said that Navient will receive three more months of business from the Obama Administration. Naturally a number of critics were disappointed by the leak. According to Chris Hicks, of the Washington-based non-profit Debt-Free Future campaign for Jobs With Justice,
"If the Education Department is really allocating Navient new loans after its history of unlawful practices, it shows that the department isn't prioritizing the safety of borrowers. Instead, they're prioritizing their contractors."Chris Hicks' group called on secretary of education Arne Duncan to suspend contracts with the Sallie Mae spin-off.
However, from the perspective of the Department of Education, Navient has improved its customer service record recently. Out of the four major student loan service providers, Navient had the highest ratio of customers paying their student loans regularly. Likewise, the lender had the second highest share of borrowers on income-based repayment plans.
Getting the word out on the income-based plans has been a priority of the Obama Administration.
Nevertheless, the accusations that Sallie Mae and then Navient violated the trust of veterans is a hard disgrace to live down.
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