Nov 18 2016
WASHINGTON – Today, Senator Tom Carper (D-Del.), top Democrat on the Homeland Security and Governmental Affairs Committee and a 23-year veteran of the Navy, responded to a new Government Accountability Office (GAO) report that calls for improvements to ensure that eligible servicemembers can obtain a six percent interest rate cap on their federal and private student loans as required under the Servicemembers Civil Relief Act (SCRA).
“I am encouraged that more servicemembers have begun receiving the SCRA interest rate cap for student loans since the Department of Education began requiring loan servicers to conduct automatic eligibility checks,” said Senator Carper. “However, I am concerned that servicemembers who receive inaccurate information from the Department of Defense may not receive the benefit. I plan to follow up with Secretary Carter on this report to ensure that our servicemembers are not being disadvantaged by outdated and inaccurate information.”
“Implementing GAO’s recommendations will help ensure that the brave men and women who proudly serve our country receive the benefits they have earned while they are serving on active duty,” Senator Carper continued. “Ultimately, we must ensure that the federal government is doing all that it can so that eligible servicemembers receive SCRA benefits for both federal and private student loans. I also plan to follow up with the Attorney General, Department of Education and Consumer Financial Protection Bureau (CFPB) regarding options for strengthening oversight of SCRA compliance.”
GAO found the number of servicemembers with federal student loans increased dramatically when the Department of Education began requiring loan servicers to regularly use a Department of Defense (DOD) website to identify eligible servicemembers and automatically apply the rate cap without a written request from servicemembers. GAO found that 126,272 servicemembers received the six percent interest rate cap on their federal student loans for December 2015, compared to 382 in October 2008.
However, the GAO report, “Student Loans: Oversight of Servicemembers’ Interest Rate Cap Could Be Strengthened,” which Senator Carper requested as part of his oversight of benefits and protections for servicemembers and veterans, found servicemembers continue to face challenges in obtaining the cap. For example, GAO identified a number of inaccuracies in DOD information used to inform servicemembers about SCRA, including erroneous statements that the rate cap does not apply to student loans.
GAO also found that eligible servicemembers are at risk of not receiving the rate cap for some private student loans because automatic eligibility checks are only required for federal student loans, and that federal oversight of SCRA compliance for nonbank lenders and servicers is lacking.