Dive Brief:
- The U.S. Department of Education’s Inspector General released a scathing report this week, claiming the department’s review of student loan servicers and their application of federal policy concerning interest rates for active-duty military members was flawed.
- The Washington Post reports the agency’s watchdog arm found its public statements regarding its investigation “unsupported and inaccurate,” considering the department used an inadequate sample of loans in its review.
- Sen. Elizabeth Warren (D-MA) was among those who requested an Inspector General review following the Justice Department’s $60 million settlement with Navient, one of the department’s student loan servicers, and now she is calling on the Department of Education to account for its actions.
Dive Insight:
Part of the disparity between the investigations by the Justice Department and the Education Department can be explained by different standards they used in evaluating the student loan servicers’ actions. The Justice Department expected the servicers to be more proactive in applying reduced interest rates for active-duty military personnel than Education Department policy required. Still, in the wake of the Justice Department’s investigation and settlement, the Education Department changed its policies. Now servicers are expected to cross-check their loan portfolios against a Defense Department database and grant the benefit automatically. Before, service members had to ask for it.
The Department of Education is in a complex situation as an entity that needs to collect on student loans it grants to operate, given that it is also charged with protecting the nation’s students. It has been heavily criticized for its protection of for-profit student loan servicers like Navient. The Washington Post reports it will begin shifting much of its business to nonprofit companies based on a new formula for divvying up its portfolio that was mandated by Congress.