Last week, the Department of Justice found Sallie Mae in violation of the Servicemembers Civil Relief Act (SCRA), ordering them to pay $96.6 million in restitution and penalties for unfair and deceptive practices while servicing private student loans. Sallie Mae admits no wrongdoing.
$60 million of that money is to compensate an estimated 60,000 borrowers whose SCRA benefits Sallie Mae may have improperly denied. So, what is SCRA, who does it affect, and why is violating it such a big deal?
On December 19, 2003, President Bush signed the SCRA into law. For eligible active duty servicemembers (more on that in a bit), this act created many types of consumer protections.
For example, if you borrowed student loans before your service, you can have their interest rates lowered to 6% while you’re on active duty. In addition, the SCRA also:
- Protects you from being evicted for non-payment of rent while you are on active duty if your rent is $2,932.31 or less.
- Lets you terminate a housing lease if you are deployed to a new location for at least 90 days or if you receive permanent change-of-station orders.
- Caps the interest accruing on other debt you borrowed before your military service to 6%. You can apply for this retroactively, up to 180 days after your active duty service has ended.
- Protects activated National Guard and Reserve members from losing life insurance coverage due to non-payment on policies that are valued up to $250,000.
- Prevents states from using your income earned to determine your spouse’s tax rate if you do not live in the state that you list as your permanent residence.
You need to be an eligible servicemember to reap these benefits. This includes:
- Members of the U.S. military serving on active duty.
- National Guard members on active service authorized by the President or the Secretary of Defense for a period of more than 30 consecutive days for the purposes of responding to a national emergency declared by the President and supported by federal funds (that’s a mouthful).
- Commissioned officers of the Public Health Service or the National Oceanic and Atmospheric Administration (NOAA) on active service.
- Servicemembers absent from duty due to sickness, wound, leave, or other lawful cause.
And The Big Deal Is?
Our government acknowledges the sacrifices that our servicemembers have to make when they serve—especially while on active duty. To help make things a little easier, they put programs and laws like the SCRA in place so that servicemembers can concentrate on their military responsibilities without worrying about their civil obligations.
Sallie Mae was found to be denying military members the interest rate cap on their student loans, obtaining default judgments against servicemembers who qualified for SCRA, and charging excessive rates to documented military borrowers—a serious no-no (and a PR nightmare to boot). Sallie Mae was also cited for “not taking the extra step” of contacting their servicemembers and proactively helping them get their interest relief.
Sallie Mae is one of the U.S. Department of Education’s four federal student loan servicers. The Department will be reviewing all of its servicers to make sure that they are fully compliant with the SCRA provisions in servicing federal student loans and determine if any further actions would need to be taken.
Your Next Steps
If you think Sallie Mae incorrectly denied your SCRA benefits, please go to this site for more information. There isn’t a whole lot there right now, but it will be updated as more details about how you may be reimbursed are determined.
Have a question about your rights as a borrower in the military? Post it below.
(Photo: The U.S. Army)