WASHINGTON (AP) — The Education Department conducted a flawed review of whether student loan servicers followed the law and provided interest rate caps on loans to military personnel, and then released inaccurate information about that review to the public, according to the agency's inspector general.
A report from the IG's office released Tuesday says the department had a faulty sampling design that meant it tested too few borrowers for the interest rate cap, as well as other errors in how the review was conducted.
Because of that, the press release about the review last May was "unsupported and inaccurate," the report said. The release from the department had concluded that a very small number of military borrowers were incorrectly denied.
The Education Department began the review of four of the nation's biggest loan servicers — Navient, Great Lakes, PHEAA and Nelnet — after the Justice Department alleged in a 2014 complaint that Navient had charged excessive interest rates to thousands of service members. Navient, formerly part of Sallie Mae, reached a $60 million settlement with the government in the case.
Under federal law, eligible active-duty military personnel can receive an interest rate cap of 6 percent on certain loans, including student loans.
In response, department press secretary Dorie Nolt the agency takes "very seriously the issues raised by the Inspector General."
Nolt said the department would review the findings more carefully and "take any appropriate steps to ensure that the department's reviews of financial institutions meet the highest standards."
The report from the agency's inspector general had been requested by three Democrats in the Senate — Sens. Patty Murray of Washington, Elizabeth Warren of Massachusetts, and Richard Blumenthal of Connecticut. They said they were concerned about the methodology of the department's review and whether it adequately identified military personnel who had been overcharged.
Murray, in a statement, said the IG report makes clear that the "initial review from the department used a deeply flawed methodology and papered over mistreatment of military borrowers." She added, "One servicemember cheated on their student loans is one too many."