CBA-SLSA-EFC Letter to Secretary Duncan

Dear Mr. Secretary:

Members of the undersigned associations (“the Associations”) engaged in student lending share the goal of assuring that every servicemember entitled to benefits under the Servicemembers Civil Relief Act (“SCRA”) receives them, without having to surmount unnecessarily burdensome documentation or other barriers that could preclude or delay their receipt. Unfortunately, conflicting statutes and restrictive regulatory guidance on how federal student loans are to be handled under the SCRA have worked to obstruct full achievement of this goal. We are writing to seek your assistance in addressing this issue and to request a meeting with you and other appropriate officials to address the issue at your earliest possible convenience.

Request for Clarification on Application of New Procedures to Other Parties

As you know, the SCRA provides a wide range of benefits and protections for servicemembers. It is intended to postpone or suspend certain financial obligations of servicemembers during the term of their military service, and includes a six percent (6%) interest rate cap on credit obligations incurred prior to their service. In a 2011 letter to the Department of Education (“Department”), the Associations recommended changes to ease the documentation requirements imposed on servicemembers. The Department’s response was that for SCRA benefits to be granted, military orders and a separate written notice must be received, and that other forms of documentation were not acceptable. Recently, the Consent Order in the case of United States v. Sallie Mae Inc., in the U.S. District Court, District of Delaware (“Consent Order”) seems to indicate that the Department of Justice and the Department recognize the documentation problems created by the Department’s policy and seek to provide greater flexibility. Unfortunately, it is now not clear whether the Consent Order alters the Department’s longstanding policy and published standard for determining eligibility for SCRA benefits.

The Consent Order provides several options, beginning on page 16, for supplying a lender/servicer with “written notice of eligibility” for SCRA-required reduced interest rates:

o Written military orders transmitted by facsimile, mail or overnight delivery;

o Servicemembers’ requests for a military deferment or forbearance; or,

o An “online intake form” to be developed by the lender/servicer.

To read the full Comment Letter, download the PDF.