June 13, 2014

On June 9, President Obama issued a memo concerning student loan debt for servicemembers and their protections under federal law.

In 2012, the U.S. Consumer Financial Protection Bureau published a report indicating a number of student borrowers were having trouble accessing their rights under the Servicemembers Civil Relief Act (SCRA) which caps student loan interest rates at 6 percent.

A Department of Justice investigation led to a settlement against Sallie Mae, the nation’s largest student loan servicer, in May of this year. Sallie Mae was ordered to pay $96.6M for violating the rights of servicemembers by imposing interest rates above the 6 percent cap.

The settlement requires Sallie Mae to determine which of its borrowers are eligible for the 6 percent rate, and apply the rate cap without the need for borrowers to submit a request.

Servicemembers with private student loans should still contact their student loan servicer to inquire how to obtain SCRA protections.

If you are a servicemember and have a federal student loan that you took out before you entered service, you are no longer required to ask your loan servicer or send in your orders for an interest rate reduction. Your interest rate reduction will be applied automatically.

For more information visit consumerfinance.gov/servicemembers and consumerfinance.gov/students.