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Sallie Mae Accused of Federal Violations Against Active-Duty Servicemembers; Government Contract in Danger

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Sallie Mae might find itself in danger of losing its lucrative contract with the U.S. Education Department (ED) pending an investigation that has determined the student loan lender cheated active-duty soldiers.

According to the Huffington Post, the U.S. Department of Justice and the Consumer Financial Protection Bureau (CFPB) and Federal Deposit Insurance Corp. (FDIC) lead the federal probe. Several state attorneys general are also investigating Sallie Mae and other loan borrower advocates have called for the ED to call off its agreement with the student loan lender.

"The contract is black and white - if you violate federal law, you lose your contract," Chris Hicks, of the Debt-Free Future campaign for Jobs With Justice, told the HP.

The latest findings suggest Sallie Mae denied active-duty soldiers their student loan rights under the Servicemembers Civil Relief Act (SCRA). The federal law is meant to alleviate some of the financial, legal and administrative pressures for active-duty soldiers.

The Justice Department, responsible for enforcing the SCRA, and FDIC have publicly stated they plan to pursue legal action against Sallie Mae. The outcome of a lawsuit or a resulting settlement could cost the student loan lender its ED contract making it the government's preferred lender.

"If the Education Department fails to enforce that clause of the contract, they are letting down borrowers, soldiers and taxpayers," Hicks said. "The department needs to take this seriously, because Sallie Mae's actions are obscene. They've betrayed our trust."

Sallie Mae released a news brief Wednesday stating it is already negotiating settlements in the numerous probes it is facing.

The CFPB, several states and student loan borrower advocates have been critical of Sallie Mae and the ED for months. However, no voice has been heard louder or more clearly than that of Sen. Elizabeth Warren (D-Mass.).

She has written several times to ED Secretary Arne Duncan criticizing his involvement with Sallie Mae. In Dec., she famously warned Duncan and his department from turning into Sallie Mae's "lapdog."

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