The U.S. Department of Education is in hot water. According to its inspector general, the department conducted a flawed investigation into its student loan contractors and misled the public, reports the Huffington Post.
This stems from a 2014 Justice Department probe of Navient Corp., one of the Education Department’s student loan servicers. The DOJ’s investigation resulted in a $60 million fine against the company for unlawfully charging military service members high interest rates. That practice violated the Servicemembers Civil Relief Act, which caps student loan interest rates at 6 percent for active duty troops, as the Washington Post explains.
Federal prosecutors found that Navient illegally charged nearly 78,000 service members interest rates above the 6 percent cap. The Justice Department also accused Navient of denying benefits to some troops and illegally taking legal action against service members who fell behind on payments, according to the Washington Post.
The DOJ’s investigation triggered an Education Department audit of Navient and three more of its student loan contractors: American Education Services, Nelnet, and Great Lakes.
Many in Washington were surprised when the Education Department released a report last year clearing the loan companies, concluding that there was no evidence of widespread wrongdoing.
That report, which sharply contradicted the Justice Department’s findings, raised a red flag. Three Democratic Senators—Elizabeth Warren of Massachusetts, Richard Blumenthal of Connecticut, and Patty Murray of Washington—asked the Education Department’s inspector general to conduct an internal audit.
The inspector general’s audit (PDF), released Tuesday, says the Education Department used an inadequate sample from its four student loan service providers. More damaging, the audit states that the department knew that its investigation was faulty.
The Huffington Post reported these reactions to the repudiation of the Education Department’s exoneration of the student loan companies:
Murray said the department’s investigation “papered over mistreatment of military borrowers.”
Warren stated: “Today’s report is a stunning indictment of the Department of Education’s oversight of student loan servicers, exposing the extraordinary lengths to which the department will go to protect these companies when they break the law.”
Blumenthal called the department’s probe a “sham study” that’s a “shameful abdication of responsibility.”
According to the Huffington Post, this could harm the confirmation of acting Education Secretary John King. His predecessor, Arne Duncan, oversaw the department’s audit of the loan companies.
This damaging report was released after King appeared at a confirmation hearing by the Senate’s education committee—which apparently ran smoothly, according to the Washington Post. It was the first step toward a final Senate confirmation vote.