UPDATE 1-Sallie Mae to refund military members $60 mln for student loans
(Adds details of settlements, comment from Navient)
WASHINGTON May 13 (Reuters) - Student loan giant Sallie Mae and student loan servicer Navient Corp will pay a refund totaling about $60 million to members of the military whose interest rates it failed to cap at 6 percent, in violation of federal law, the U.S. Justice Department said on Tuesday.
Separately, the Federal Deposit Insurance Corp (FDIC) announced a settlement with the two companies that will pay back $30 million to borrowers affected by late fee practices, which the regulator said were deceptive.
Sallie Mae allocated payments in a way that maximized late fees and did not adequately disclose how borrowers could avoid them, the agency said.
On May 1, Sallie Mae split into two separate companies: Sallie Mae Bank, which will focus on making private student loans, and Navient, which services loans on behalf of the Department of Education and the Federal Family Education Loan Program.
The majority of Tuesday's settlement will be borne by Navient.
In addition to the government-directed payments, the student loan servicer said it would refund another $42 million to borrowers who are not technically eligible under the FDIC settlement but who were overcharged due to the late fee issues.
In a statement, Navient said most of the service member refunds will be distributed to customers that the company did not believe qualified for the benefit based on prior regulatory guidance. But Navient said it was entering into the settlement anyway, to put the matter behind it.
The company told shareholders last week that it had set aside $173 million to settle the two investigations.
The settlement with the Justice Department will compensate an estimated 60,000 service members who were charged more than the legally mandated 6 percent interest rate, which was put in place to keep education affordable for military personnel. (Reporting by Aruna Viswanatha in Washington and Peter Rudegeair in New York; Editing by Chizu Nomiyama and Tom Brown)
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