STUDENT LOANS

Oversight of 

Servicemembers' 

Interest Rate Cap 

Could Be 

Strengthened

Report to Ranking Member, Committee 

on Homeland Security and 

Governmental Affairs, U.S. Senate

November 2016

GAO-17-4

United States Government Accountability Office
United States Government Accountability Office

Highlights of GAO-17-4, a report to the 

Ranking Member, Committee on Homeland 

Security and Governmental Affairs, U.S. 

Senate

November 2016

STUDENT LOANS

Oversight of Servicemembers’ Interest Rate 

Cap Could Be Strengthened

Why GAO Did This Study

SCRA helps servicemembers 

financially by capping interest rates on 

student loans during active duty. As of 

May 2016, about 1.3 million 

servicemembers were on active duty. 

The number of active duty 

servicemembers with student loans is 

unknown, as is the number eligible for 

the rate cap who may not have 

received it. GAO was asked to review 

implementation of the rate cap for 

servicemembers’ student loans. 

This report examines: (1) the number 

of servicemembers who received the 

cap for student loans (2) challenges 

that servicemembers face in doing so, 

and (3) the extent to which federal 

agencies oversee implementation of 

the cap. GAO analyzed data from 2008 

through 2015 from the 10 federal 

student loan servicers; reviewed 

relevant federal laws, regulations, 

policies, and training materials; and 

interviewed representatives of the 

servicers and servicemember 

advocacy groups, and officials from 

DOD, Education, the CFPB and DOJ. 

What GAO Recommends

GAO is making four recommendations, 

including that DOD improve the

accuracy of SCRA information on 

student loans, and that CFPB and DOJ 

collaborate to ensure routine oversight 

of nonbank lenders and servicers, and 

seek additional authority, if needed. 

DOD disagreed and said it already 

provides accurate information. DOJ 

agreed and CFPB did not specifically 

agree, but said that all eligible 

servicemembers should receive the 

cap. GAO maintains that DOD’s 

outreach materials are not always 

accurate and that routine oversight is 

necessary for nonbank lenders and 

servicers.

What GAO Found

The Servicemembers Civil Relief Act (SCRA) provides servicemembers with an 

interest rate cap of 6 percent on student loans while they are on active duty. The 

number of servicemembers with federal student loans who received this rate cap 

increased as a result of the Department of Education (Education) requiring 

federal loan servicers to regularly use the Department of Defense’s (DOD) SCRA 

website to identify eligible servicemembers and automatically apply the rate cap 

without requiring servicemembers to provide written notice of active duty (see 

figure). Using the automated process, some federal loan servicers identified 

borrowers who had been eligible for the rate cap as far back as 2008, when the 

SCRA rate cap first applied to federal loans, and retroactively applied the cap.

Number of Servicemembers with Federal Student Loans Who Received the Servicemembers 

Civil Relief Act (SCRA) Interest Rate Cap, October 2008 to December 2015

Note: In December 2014 the Department of Education issued the final in a series of updates to its 

contracts with the 10 federal student loan servicers directing them to use the SCRA website on a 

monthly basis. 

Servicemembers can face challenges obtaining the SCRA rate cap due to their 

failure to receive accurate information. Federal internal control standards state 

that agencies should externally communicate the information necessary to 

achieve their objectives. However, some servicemembers eligible for the cap 

may not receive it because information used by DOD to inform them about the 

cap is inaccurate: for example, some DOD information states that the rate cap 

does not apply to student loans. In addition, because the automated process to 

identify eligible servicemembers is not required for private student loans, 

servicemembers with private loans may be particularly at risk of not receiving the 

accurate information needed to obtain the cap themselves. 

While Education monitors the application of the SCRA cap for federally owned or 

guaranteed student loans, there is a gap in oversight for private student loans. 

The Consumer Financial Protection Bureau (CFPB), four federal financial 

regulators of banks, and the Department of Justice (DOJ) each oversees aspects 

of private student loans or SCRA, but none has the authority to routinely oversee 

SCRA compliance at nonbank entities that handle private student loans. These 

nonbank entities include institutions of higher education and private companies. 

The resulting gap in oversight of SCRA compliance for these nonbank entities 

that make or service private student loans increases the risk that 

servicemembers will not receive a benefit for which they are eligible. View GAO-17-4. For more information, contact 

Melissa Emrey-Arras at (617) 788-0534 or 

emreyarrasm@gao.gov.
Page i GAO-17-4 Federal Student Loans

Letter 1

Background 4

Number of Servicemembers Who Received the SCRA Interest 

Rate Cap on Student Loans Has Increased 13

Servicemembers Face Challenges Obtaining the SCRA Interest 

Rate Cap for Student Loans 20

Federal Agencies Use Various Mechanisms to Oversee 

Application of the Interest Rate Cap for Student Loans, but 

Limitations Exist 23

Conclusions 33

Recommendations for Executive Action 34

Agency Comments and Our Evaluation 34

Appendix I Objectives, Scope, and Methodology 39

Appendix II Additional Data from Federal Loan Servicers and Private Lenders 45

Appendix III Comments from the Department of Defense 50

Appendix IV Comments from the Department of Education 54

Appendix V Comments from the Consumer Financial Protection Bureau 56

Appendix VI Comments from the Department of Justice 58

Appendix VII Comments from the Prudential Financial Regulators 61

Appendix VIII GAO Contact and Staff Acknowledgments 63

Contents
Page ii GAO-17-4 Federal Student Loans

Related GAO Products 64

Tables

Table 1: Types of Student Loans for Funding Higher Education 6

Table 2: Process Used to Identify Borrowers Eligible for the 

Servicemembers Civil Relief Act (SCRA) Rate Cap, by 

Loan Type 8

Table 3: Selected Interest Rates by Loan Type, Federal Loans 

and Commercial Federal Family Education Loans (FFEL), 

2008-2016 41

Table 4: Selected Interest Rates for Private Student Loans, 

December 2011 41

Table 5: Number of Servicemembers with Federal Loans and 

Commercial Federal Family Education Loans (FFEL) Who 

Received the Servicemembers Civil Relief Act (SCRA) 

Interest Rate Cap for Each Month, by Identification 

Method, Selected Months from October 2008 to 

December 2015 45

Table 6: Selected Statistics of the Number of Months 

Servicemembers’ Federal Loans and Commercial Federal 

Family Education Loans (FFEL) Loans Had the SCRA 

Interest Rate Cap Applied, October 1, 2008 to December 

31, 2015 46

Table 7: Selected Statistics of Federal Loan and Commercial 

Federal Family Education Loan (FFEL) Interest Rates 

Prior to Having the SCRA Cap Applied, October 1, 2008 

to December 31, 2015 46

Table 8: Selected Statistics of Disbursement Amounts for Federal 

Loans and Commercial Federal Family Education Loans 

(FFEL) that Had the SCRA Rate Cap Applied, October 1, 

2008 to December 31, 2015 47

Table 9: Selected Statistics of Disbursement Amounts for

Servicemembers with Federal Loans and Commercial 

Federal Family Education Loans (FFEL) Who Received 

the SCRA Rate Cap, October 1, 2008 to December 31, 

2015 47

Table 10: Outcomes of Eligibility Determinations for the SCRA 

Rate Cap, Broken Out by Loan Type and Method for 

Determining Eligibility, October 2008 to December 2015 48
Page iii GAO-17-4 Federal Student Loans

Table 11: Number of Servicemembers with Private Student Loans 

Held by 6 Private Lenders Who Received the 

Servicemembers Civil Relief Act (SCRA) Interest Rate 

Cap, as of Selected Dates 49

Figures

Figure 1: Automated Eligibility Check to Identify Servicemembers 

Who Qualify for the Rate Cap on Their Student Loans 10

Figure 2: Number of Servicemembers with Federal Student Loans 

Who Received the Servicemembers Civil Relief Act 

(SCRA) Interest Rate Cap for Each Month, by 

Identification Method, October 2008 to December 2015 15

Figure 3: Number of Servicemembers with Commercial Federal 

Family Education Loans (FFEL) Who Received the 

Servicemembers Civil Relief Act (SCRA) Interest Rate 

Cap for Each Month, by Identification Method, October 

2008 to December 2015 18

Figure 4: Private Student Loan Oversight Responsibilities of 

Federal Agencies for the Servicemembers Civil Relief Act 

(SCRA) 29

Abbreviations

CFPB Consumer Financial Protection Bureau

Direct Loans William D. Ford Direct Loans 

DMDC Defense Manpower Data Center

DOD Department of Defense

DOJ Department of Justice 

Education Department of Education

FFEL Federal Family Education Loans 

SCRA Servicemembers Civil Relief Act

This is a work of the U.S. government and is not subject to copyright protection in the 

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Page 1 GAO-17-4 Federal Student Loans

441 G St. N.W.

Washington, DC 20548

November 15, 2016

The Honorable Thomas R. Carper

Ranking Member

Committee on Homeland Security and Governmental Affairs

United States Senate

Dear Senator Carper:

The Servicemembers Civil Relief Act (SCRA) provides, among other 

benefits, a cap of 6 percent on the interest rate of previously incurred 

debt, including student loan debt. The benefit is provided during periods 

of active military service. As of May 2016, there were about 1.3 million 

servicemembers in active periods of military service. Although the number 

of servicemembers with student loans is unknown, there have been 

indications that those with student loans who are eligible for an interest 

rate of 6 percent were not always receiving this benefit. Specifically, the 

Department of Justice (DOJ) in 2014 reached a $60 million settlement 

with one of the largest servicers of federal student loans for alleged 

violations of the SCRA interest rate cap that affected almost 78,000 

servicemembers.1 Subsequent reports of possible violations raise 

questions as to whether other servicemembers may not have been 

receiving a benefit for which they are eligible.

The Ranking Member of the Senate Committee on Homeland Security 

and Governmental Affairs requested that GAO examine issues related to 

 1

The Department of Education contracts with student loan servicers to administer federal 

student loans. The Department of Justice consent order resolved allegations contained in 

the United States’ complaint that defendants Navient Solutions, Inc., Navient DE 

Corporation, and Sallie Mae Bank, (collectively “Defendants”) violated the 

Servicemembers Civil Relief Act (SCRA), 50 U.S.C. §§ 3901-4043, with respect to student 

loans they owned or serviced, which includes loans owned or guaranteed by the 

Department of Education and private student loans. The settlement included a $60 million 

settlement fund for compensation due to borrowers, as well as a civil penalty of $55,000. 

The Federal Deposit Insurance Corporation—one of four financial regulators of banks—

also entered into consent orders with Sallie Mae Bank and Navient Solutions, Inc. for 

engaging in unsafe and unsound and deceptive practices and for inadequate disclosure to 

customers, including misrepresenting aspects of SCRA and violating the 6 percent interest 

rate cap for eligible loans. Navient Solutions, Inc. and Navient DE Corporation were 

formerly known as Sallie Mae, Inc., and SLM DE Corporation.

Letter
Page 2 GAO-17-4 Federal Student Loans

implementation of the SCRA interest rate cap for student loans. This 

report answers the following questions: (1) How many servicemembers 

have received the SCRA interest rate cap for their student loans; (2) what 

challenges do servicemembers face obtaining the cap; and (3) to what 

extent do federal agencies oversee implementation of the cap?

To describe how many servicemembers have received the SCRA interest 

rate cap on their federally-owned and guaranteed student loans, we 

reviewed aggregate data from the Department of Education’s (Education) 

National Student Loan Data System and analyzed record-level data from 

the 10 federal student loan servicers—the companies contracted to 

service loans owned by Education during the period of our review—for 

the period October 2008 (the beginning of the first full fiscal year that 

SCRA was applied to student loans owned by Education) through 

December 2015 (the most recent available data).2 We also reviewed 

aggregate data from six private student lenders, who together accounted 

for about two-thirds of outstanding private student loan debt as of March 

31, 2016.3 These data included the number of private student loans, 

borrowers, and outstanding loan balances overall and for those receiving 

the SCRA cap, as of September 30, 2014, September 30, 2015, 

December 31, 2015, and March 31, 2016 (the most recent available 

data).4 We determined these data to be sufficiently reliable for the 

purposes of this report by reviewing information about the data and 

interviewing knowledgeable officials.

 2

Aspire was an eleventh federal student loan servicer until September 2015. Because 

Aspire was still servicing federal loans when we began our review in May 2015, we 

included it in our interviews with federal student loan servicers. However, Aspire was no 

longer servicing federal loans when we submitted our data request to the servicers in 

January 2016, so we did not include it in our record-level data request. Instead we 

received record-level data on the federal student loans that had been serviced by Aspire 

from the Missouri Higher Education Loan Authority, the loan servicer that took over 

Aspire’s federal loan portfolio and one of the 10 current federal loan servicers. One of the 

other federal loan servicers stopped servicing such loans as of August 2016. (For 

additional information about federal loan servicers, see appendix I.)

3

For additional information about the 6 lenders’ data, see appendix I.

4

We requested data from the 6 private lenders as of September 2014 and September 

2015 because these dates aligned with the two final fiscal years for which we requested 

data from the federal loan servicers. We also requested data from December 2015 and 

March 2016 as they were the two most recent quarters available when we submitted our 

request.
Page 3 GAO-17-4 Federal Student Loans

To identify challenges servicemembers face obtaining the cap, and 

whether the challenges differ for those with private student loans, we

interviewed officials from advocacy groups that represent veterans and 

servicemembers. We also conducted semi-structured interviews with 

representatives of the 10 federal loan servicers and spoke with officials 

from the Department of Defense (DOD)—whose secretaries for each 

military branch are responsible for informing servicemembers about their 

SCRA benefits.5 In addition, we reviewed relevant agency publications, 

including outreach materials used to inform servicemembers about the 

cap, and compared this information to the current requirements for the 

SCRA interest rate cap on student loans. To determine how federal 

agencies, including Education, the Consumer Financial Protection Bureau 

(CFPB), and DOJ, oversee implementation of the SCRA interest rate cap,

we interviewed agency officials, reviewed relevant federal laws and 

regulations, and policies, procedures, and guidance on the cap, and 

assessed whether there are any gaps in overseeing the SCRA rate cap 

for student loans, using a federal framework for assessing effective 

regulatory systems.6 (See appendix I for additional detail on scope and 

methodology.)

We conducted this audit from May 2015 through November 2016, in 

accordance with generally accepted government auditing standards. 

Those standards require that we plan and perform the audit to obtain 

sufficient, appropriate evidence to provide a reasonable basis for our 

findings and conclusions based on our audit objectives. We believe that 

the evidence obtained provides a reasonable basis for our findings and 

conclusions based on our audit objectives.

 5

50 U.S.C. §§ 3915 and 3916. These 10 loan servicers also service federally-guaranteed 

(commercial) and private student loans, and our interviews with them included questions 

about their entire student loan portfolio. 

6

Although this report also includes information on the responsibilities of the four prudential 

financial regulators—Federal Deposit Insurance Corporation, Board of Governors of the 

Federal Reserve System, National Credit Union Administration, and the Office of the 

Comptroller of the Currency—related to the SCRA interest rate cap for student loans, this 

information is primarily based on prior GAO work. See GAO, Mortgage Foreclosures: 

Regulatory Oversight of Compliance with Servicemembers Civil Relief Act Has Been 

Limited, GAO-12-700 (Washington, D.C.: July 17, 2012). The regulators were given an 

opportunity to provide comments on the draft report. 
Page 4 GAO-17-4 Federal Student Loans

The Servicemembers Civil Relief Act (SCRA), enacted in 2003 as a 

modernized version of the Soldiers’ and Sailors’ Civil Relief Act of 1940, 

provides protections for servicemembers to help them meet the unique 

circumstances they face when serving their country.7 SCRA provides 

protections to active-duty servicemembers in the event that their military 

service prevents them from meeting financial obligations. The act 

provides mortgage-related protections, including prohibiting foreclosures 

on active-duty servicemembers’ homes without court orders. In addition, 

the act provides protections for other types of debt, such as credit cards 

and vehicle and student loans. During periods of active military service, 

the act caps interest rates and fees at 6 percent for debt incurred prior to 

active duty.8

The interest rate cap covers full-time members of the Army, Navy, Air 

Force, Marine Corps, and Coast Guard, as well as Reservists, National 

Guard members, commissioned National Oceanic and Atmospheric 

Administration officers, and commissioned Public Health Service officers, 

while they are on active duty. For the purpose of the 6 percent interest 

rate cap, “interest” is defined to include service charges, renewal charges, 

 7

Pub. L. No. 108-189, 117 Stat. 2835 (2003) (codified at 50 U.S.C. §§ 3901-4043). Under 

the act, the term “servicemember” means a member of the uniformed services, as that 

term is defined in 10 U.S.C. § 101(a)(5), which includes the Army, Navy, Air Force, Marine 

Corps, Coast Guard, and the commissioned corps of the National Oceanic and 

Atmospheric Administration and the Public Health Service. 50 U.S.C. § 3911(1).

8

The term “period of military service” is defined as the period beginning on the date on 

which a servicemember enters military service and ending on the date on which the 

servicemember is released from military service or dies while in military service. 50 U.S.C. 

§ 3911(3); see also 50 U.S.C. § 3917. “Military service” is defined, in the case of a 

servicemember who is a member of the Army, Navy, Air Force, Marine Corps, or Coast 

Guard, as active duty, as defined in 10 U.S.C. § 101(d)(1), and, in the case of a member 

of the National Guard, includes service under a call to active service authorized by the 

President or the Secretary of Defense for a period of more than 30 consecutive days 

under 32 U.S.C. § 502(f), for purposes of responding to a national emergency declared by 

the President and supported by federal funds. In the case of a servicemember who is a 

commissioned officer of the Public Health Service or the National Oceanic and 

Atmospheric Administration, military service is defined as active service. Military service 

also includes any period during which a servicemember is absent from duty on account of 

sickness, wounds, leave, or other lawful cause. 50 U.S.C. § 3911(2). The act’s provisions 

include various types of debt—mortgage, credit card, vehicle loans—incurred by the 

servicemember or jointly by the servicemember and his or her spouse.

Background

Interest Rate Cap under 

SCRA
Page 5 GAO-17-4 Federal Student Loans

fees, or any other charges with respect to an obligation or liability.9 Any 

such interest above the 6 percent rate—whether it has yet accrued—is 

permanently forgiven, and the monthly payment amount going forward 

must be reduced by the amount of interest forgiven allocable to the period 

for which payment is made.10 The interest rate cap has applied to private 

student loans since 1942 under a provision of the Soldiers’ and Sailors’ 

Civil Relief Act of 1940, and to federally owned and guaranteed loans 

since the 2008 reauthorization and amendment of the Higher Education 

Act of 1965 (HEA).11 During 2008-2016, interest rates for student loans 

owned by Education ranged between 3.4 and 7.9 percent, with rates 

above 6 percent in every year for at least some of these loans, while the 

most common interest rate for loans guaranteed, but not owned by 

Education was 6.8 percent, ranging from 5.6 to 8.5 percent.12 Available 

data for private student loans show that fixed interest rates charged by 9 

major lenders ranged from about 3 to 19 percent, with an average starting 

interest rate of 7.8 percent (see appendix I for additional information on 

student loan interest rates).13

 9

50 U.S.C. § 3937(d)(1).Servicemembers who are eligible for and receiving other military 

benefits that result in loan interest rates at or under 6 percent, such as the hostile pay 

benefit of no interest accrual, authorized under 20 U.S.C. § 1087e(o), would not also 

receive the SCRA interest rate cap.

1050 U.S.C. § 3937(a)(2) and (a)(3).

11The Higher Education Opportunity Act, Pub. L. No. 110-315 § 422(g), 122 Stat. 3078, 

3230 (2008), amended §428(d) of the Higher Education Act of 1965, to specify that the 

interest rate cap provided for in section 207 of the Servicemembers Civil Relief Act 

(SCRA), 50 U.S.C. § 3937, applies to federal student loans, effective retroactively to 

August 14, 2008.

12Interest rates are generally based on the year in which a student loan was disbursed. 

Interest rates for undergraduate subsidized loans owned by Education ranged from 3.4-6 

percent from 2008-2016, while unsubsidized undergraduate rates ranged from 3.8-6.8 

percent, remaining at 6.8 percent from 2008-2012. Interest rates for graduate student 

loans owned by Education were above 6 percent from 2008-2016, with the exception of 

unsubsidized graduate loans disbursed in 2013, 2015, and 2016, which had interest rates 

of 5.4, 5.8 and 5.3 percent. For loans guaranteed, but not owned by Education, interest 

rates for all undergraduate and graduate loans were 6.8 percent or higher, with the 

exception of subsidized undergraduate loans disbursed in 2008 and 2009, which had 

interest rates of 6 and 5.6 percent.

13Private student loans could have fixed or variable interest rates, and initial interest rates 

depend on the credit scores of borrowers. Borrowers with lower credit scores generally 

receive the highest interest rates.
Page 6 GAO-17-4 Federal Student Loans

Student loans play a crucial role in ensuring access to higher education 

for millions of students, and three types of student loans are or have been 

available through governmental and private sources: federal loans, 

commercial Federal Family Education Loans (FFEL), and private loans 

(see table 1).14

Table 1: Types of Student Loans for Funding Higher Education

Loan type Loan details

Outstanding balance for all 

loans of each type as of 

March 31, 2016

1. Federal Loans $996.2 billion

William D. Ford Direct Loans

(Direct Loans)

Owned by Education and made to students and families 

using federal funds. 

$896.6 billion

Federal Family Education Loans 

(FFEL)

Owned and guaranteed by Education and made to students 

and families by private and state lenders. 

$99.6 billion

2. Commercial FFEL Loans Guaranteed by Education and made to students and families 

by private and state lenders.

$250.6 billion

3. Private Student Loans Owned and made to students and families by private and 

state lenders. 

$102.0 billion

Source: Department of Education (Education) and MeasureOne. | GAO-17-4

Note: FFEL program loans were originated by private and state entities, but Education has owned 

some of these loans since 2008, when the Higher Education Act was amended to give the Secretary 

of Education temporary authority to purchase FFEL loans from eligible lenders. The Ensuring 

Continued Access to Student Loans Act of 2008, Pub. L. No. 110-227, § 7b, 122 Stat. 740, 746-48 

(codified at 20 U.S.C. § 1087i-1). Those loans that Education did not purchase were issued under the 

FFEL federal program although they are still owned by private and state lenders, and are often 

referred to as commercial FFEL loans. No new FFEL loans have been made since the authority to 

make or insure them was terminated as of July 1, 2010 by the SAFRA Act, Pub. L. No. 111-152, § 

2201, 124 Stat. 1029, 1074 (2010).

 14The Direct Loan program is the primary federal student loan program administered by 

Education. FFEL program loans were originated by private and state entities, but 

Education has owned some of these loans since 2008, when the Higher Education Act 

was amended to give the Secretary of Education temporary authority to purchase FFEL 

loans from eligible lenders. The Ensuring Continued Access to Student Loans Act of 2008, 

Pub. L. No. 110-227, § 7b, 122 Stat. 740, 746-48 (codified at 20 U.S.C. § 1087i-1). Those 

loans that Education did not purchase and that are still owned by private and state lenders 

are often referred to as commercial FFEL loans. Commercial FFEL loans are still 

federally-guaranteed against borrower default, death, permanent disability, or in limited 

instances, bankruptcy. No new FFEL loans have been made since the authority to make 

or insure them was terminated as of July 1, 2010 by the SAFRA Act, enacted as part of 

the Health Care and Education Reconciliation Act of 2010, Pub. L. No. 111-152, 124 Stat. 

1029.

Student Loans and 

Student Loan Servicers
Page 7 GAO-17-4 Federal Student Loans

Student loan servicers are banks that service loans they make or 

nonbanks contracted to handle billing and repayments, inform borrowers 

about repayment options, and respond to customer inquiries. As of 

December 31, 2015, Education had contracts with 10 companies to 

service federal student loans, and all of these companies also service 

commercial FFEL loans.15 No new FFEL loans have been made since 

2010, but there is about $350.2 billion in outstanding FFEL loans. FFEL 

loans were originated by private or state entities, but Education has 

owned some of these loans since 2008 (referred to as federal loans in 

this report). Those that are still owned by private and state entities are 

often referred to as commercial FFEL loans (referred to as commercial 

FFEL loans in this report). The 10 companies that serviced federal loans 

as of December 2015, also each service some private student loans, 

which are student loans that are not owned or guaranteed by Education.

The SCRA interest rate cap applies to federal, commercial FFEL, and 

private student loans as long as at least one party to the loan is a 

servicemember with qualifying military service.16 Historically, as provided 

in SCRA, servicemembers had to contact their student loan servicer(s) 

and provide written notice and proof of an active-duty start date.17 The 

loan servicer would apply the cap to any loans that were (a) disbursed 

prior to active military service, and (b) had an interest rate above 6 

percent.18 However, Education has since implemented new contract 

requirements for federal student loan servicers to automatically identify 

 15Overall, 21 entities currently service commercial FFEL loans, including 10 that are 

contracted by Education to service federal student loans. Other entities, such as banks 

and credit unions, may service commercial FFEL or private student loans they own, but 

the majority of student loans are serviced by the 10 companies that service federal and/or 

commercial FFEL loans under contract with Education, according to Education and CFPB 

officials. 

16For federal and commercial FFEL student loans, the SCRA interest rate cap applies only 

during periods of active military service after August 14, 2008 that began after the date a 

loan was first disbursed. After this date, any student loan debt incurred prior to a period of 

active military service by the eligible servicemember or the servicemember and spouse 

jointly is eligible for the interest rate cap. 

1750 U.S.C. § 3937(b).

18Consolidated loans are considered new loans and eligibility is based on when the 

consolidation occurred, not on when the underlying loans were first disbursed.

Identifying 

Servicemembers Eligible 

for the Interest Rate Cap 

on Their Student Loans
Page 8 GAO-17-4 Federal Student Loans

eligible servicemembers by matching their borrower files against DOD’s 

SCRA website to obtain information on active military service. The match 

identifies servicemembers who are starting active duty, in order for 

servicers to apply the cap and also those who come off active duty, in 

order for servicers to remove the cap. Since 2014, student loan servicers 

have had to match their files for borrowers with federal student loans 

against DOD’s SCRA website on a monthly basis to determine which 

borrowers have military service that qualifies them for the cap for federal 

student loans, and for what periods of time (we will refer to this process 

as the automatic eligibility check in this report).19 Education also issued 

regulations requiring the servicers of commercial FFEL loans to 

implement the automatic eligibility check as of July 1, 2016. As a result, 

written notice from servicemembers for the cap is no longer needed for 

federal or commercial FFEL loans, although servicemembers can still 

apply in writing. The automatic eligibility check is not required for private 

student loans (see table 2).

Table 2: Process Used to Identify Borrowers Eligible for the Servicemembers Civil 

Relief Act (SCRA) Rate Cap, by Loan Type

Loan type

Required automatic eligibility check via SCRA 

website to identify eligible borrowers 

Federal Loans Yes

Commercial Federal Family 

Education Loans (FFEL)

Yes

Private Student Loans No

Source: Department of Education (Education) and MeasureOne. | GAO-17-4

 19Education issued a series of updates to its contracts with the 10 federal student loan 

servicers between December 2013 and December 2014 which directed them to use 

DOD’s Defense Manpower Data Center’s SCRA website to identify servicemembers with 

qualifying military service and federal loans eligible for the interest rate cap (automatic 

eligibility check). Education expected the servicers to have this process in place for federal 

student loans by January 2015. In addition, in August 2014, Education issued a guidance 

letter to all commercial FFEL student loan servicers authorizing and encouraging them to 

use the automatic eligibility check for commercial loans, a process that has been required 

for their commercial FFEL loans since July 1, 2016 under final regulations issued by 

Education on October 30, 2015. Student Assistance General Provisions, Federal Family 

Education Loan Program, and William D. Ford Federal Direct Loan Program, 80 Fed. Reg. 

67,204, 67,237 (Oct. 30, 2015) (codified at 34 C.F.R. § 682.208(j)). In this report, we will 

refer to this process as being required by Education for federal loans as of 2014, and for 

commercial FFEL loans as of July 1, 2016.
Page 9 GAO-17-4 Federal Student Loans

Note: Education issued its final update to its contracts with student loan servicers on the required 

monthly automatic eligibility check in December 2014. Education expected the federal loan servicers 

to have the automated eligibility process in place for federal student loans by January 2015 and for 

commercial FFEL loans as of July 1, 2016, under final regulations issued by Education on October 

30, 2015. Student Assistance General Provisions, Federal Family Education Loan Program, and 

William D. Ford Federal Direct Loan Program, 80 Fed. Reg. 67,204, 67,237 (Oct. 30, 2015) (codified 

at 34 C.F.R. § 682.208(j)).

The SCRA website can be used by anyone who inputs a borrower’s 

identifying information to match DOD’s information on a servicemember’s 

periods of active military service. Users can submit one name for a 

match, or do batch matches for up to 250,000 names at one time, and the 

website should provide results within 24 hours, according to DOD. 

Servicers also have to notify each servicemember who receives the cap 

within 30 days and retain a record of the SCRA website match in the 

servicemember’s file (see fig. 1).20

 2034 C.F.R. § 682.208(j)(5). In addition, federal and commercial FFEL student loans are 

no longer subject to the 180-day rule, meaning the benefit can be applied even if the 

period of active duty ended more than 180 days earlier. See Student Assistance General 

Provisions, Federal Family Education Loan Program, and William D. Ford Federal Direct 

Loan Program, 80 Fed. Reg. 39,608, 39,614 (July 9, 2015).
Page 10 GAO-17-4 Federal Student Loans

Figure 1: Automated Eligibility Check to Identify Servicemembers Who Qualify for 

the Rate Cap on Their Student Loans

DOD, Education, CFPB, and DOJ each play a role in overseeing 

servicemembers’ student loans. DOD, Education, and DOJ also have 

roles with respect to SCRA’s interest rate cap for servicemembers’ 

student loans. Under SCRA, the DOD secretaries of each military branch 

have primary responsibility for ensuring that servicemembers receive 

notification of and information on their SCRA benefits, including for 

Federal Oversight for 

Student Loans and for 

Administering the SCRA 

Interest Rate Cap
Page 11 GAO-17-4 Federal Student Loans

student loans.

21 In addition, DOD maintains the SCRA website, which is 

considered the official source of servicemembers’ active-duty status for 

complying with SCRA. Education’s Office of Federal Student Aid 

administers federal student aid programs, including loans, and oversees 

the performance of contracted student loan servicers that handle billing 

and other administrative tasks. It also has some responsibility for 

monitoring commercial FFEL student loan servicers since the loans are 

federally guaranteed. 

The Dodd-Frank Wall Street Reform and Consumer Protection Act (DoddFrank Act) established CFPB and provided it with authority to supervise 

certain student loan lenders and servicers with respect to the enumerated 

federal consumer financial laws as defined by the Dodd-Frank Act. 

Specific to student loans, CFPB also collects borrower complaints about 

private student loans and has an internal focus, through its Ombudsman 

and Office of Servicemember Affairs, on issues affecting private student 

loan borrowers, including servicemembers and their families. However, 

because SCRA is not included in the enumerated federal consumer 

financial laws transferred to CFPB for oversight, the bureau does not

 2150 U.S.C. §§ 3915 and 3916. The Secretaries include the Secretary of the Army, the 

Secretary of the Navy for the Navy, Marine Corps and the Coast Guard when it is 

operating as a service in the Navy, the Secretary of the Air Force, the Secretary of 

Homeland Security with respect to the Coast Guard when it is not operating as a service 

in the Navy, the Secretary of Health and Human Services with respect to Public Health 

Service commissioned officers, and the Secretary of Commerce with respect to 

commissioned officers of the National Oceanic and Atmospheric Administration. 50 U.S.C. 

§ 3911(7). The majority of active-duty servicemembers serve under the DOD Secretaries 

of each branch. As of May 2016, there were about 1.3 million active-duty servicemembers 

across the Army, Navy, Air Force, and Marine Corps and about 39,838 in the Coast 

Guard. In addition, as of July 2016, there were, about 6,500 Public Health Service 

commissioned active-duty officers, and about 321 National Oceanic and Atmospheric 

Administration commissioned active-duty officers.
Page 12 GAO-17-4 Federal Student Loans

have specific oversight of SCRA compliance for private student loan 

lenders and servicers.22

The four federal financial regulators for banks—Federal Deposit 

Insurance Corporation, Board of Governors of the Federal Reserve 

System, National Credit Union Administration, and the Office of the 

Comptroller of the Currency—oversee SCRA compliance in connection 

with student loan lending and servicing by banks, credit unions, 

institution-affiliated parties as defined in the Federal Deposit Insurance 

Act, and in certain instances third-party service providers under the Bank 

Service Company Act.

23 DOJ has the specific authority to enforce SCRA 

and accepts referrals from other federal agencies, including CFPB, for 

possible SCRA violations.24

 22Pub. L. No. 111-203, Title X, 124 Stat. 1376, 1955 (2010) (codified at 12 U.S.C. §§ 

5481-5603). “Enumerated consumer laws” is a defined term in the Dodd-Frank Act that 

includes over a dozen existing federal consumer protection laws, including the Truth in 

Lending Act, the Real Estate Settlement Procedures Act of 1974, and the Equal Credit 

Opportunity Act, and “Federal consumer financial law” is a defined term that includes the 

enumerated consumer laws as well as the provisions of Title X of the Dodd-Frank Act 

itself. 12 U.S.C. § 5481(12), (14). For these enumerated laws, the consumer financial 

protection functions from the Federal Reserve System, Federal Deposit Insurance 

Corporation, Federal Trade Commission, Department of Housing and Urban 

Development, National Credit Union Administration, Office of the Comptroller of the 

Currency, and Office of Thrift Supervision were transferred to CFPB to protect consumers 

who rely on banks, credit unions, and other providers of consumer financial products or 

services, such as mortgages and credit cards. The Federal Trade Commission retained its 

enforcement authority over nonbanks provided by the Federal Trade Commission Act 

which prohibits “unfair and deceptive acts or practices in or affecting commerce,” but it 

does not have the authority to conduct compliance examinations. In addition, the Federal 

Trade Commission also enforces specific consumer protection statutes but SCRA is not 

among them.

2312 U.S.C. §§ 1752, 1756, 1813(u), 1818, 1820(b), and 1861-1867. See GAO-12-700. 

2450 U.S.C. § 4041. This provision was added to SCRA in October 2010 by the Veterans’ 

Benefits Act of 2010, Pub. L. No. 111-275, § 303(a), 124 Stat. 2864, 2877.
Page 13 GAO-17-4 Federal Student Loans

The number of servicemembers with federal student loans who received 

the SCRA interest rate cap increased dramatically when Education 

required servicers of these loans to use an automated process to identify 

qualifying servicemembers and apply the cap to their eligible loans.25 In 

particular, Education in 2014 required that federal loan servicers use the 

SCRA website each month to identify borrowers with qualifying periods of 

active military service and automatically apply the rate cap to their eligible 

federal loans, rather than requiring servicemembers to provide written 

notice of eligibility.26 When some federal loan servicers began using the 

SCRA website, they identified servicemembers with active military service 

start dates as early as 2008, when the SCRA rate cap first applied to 

federal loans. These servicers then applied the cap to servicemembers’

 25Education issued a series of updates to its contracts with the 10 federal student loan 

servicers between December 2013 and December 2014 which directed them to use 

DOD’s Defense Manpower Data Center’s SCRA website to identify servicemembers with 

qualifying military service and federal loans eligible for the interest rate cap (automatic 

eligibility check). Education expected the servicers to have this process in place for federal 

student loans by January 2015. 

26Representatives from 8 of the 10 federal loan servicers told us they implemented these 

automatic eligibility checks between June and October 2014, as Education issued updates 

to the contracts, with the remaining 2 servicers implementing the website checks as of 

June 2015. Representatives from both servicers that implemented the automatic eligibility 

checks in 2015 said they required additional time to implement the change to their data 

systems in order to automatically apply the SCRA cap, and that Education was aware of 

their timing for implementing the website checks. If a servicemember’s qualifying military 

service is open-ended, the SCRA website does not return a military service end date. 

Officials from all 10 federal loan servicers told us they remove the rate cap as soon as the 

SCRA website returns a military service end date.

Number of 

Servicemembers 

Who Received the 

SCRA Interest Rate 

Cap on Student 

Loans Has Increased

Number of 

Servicemembers with 

Federal Student Loans 

Who Received the Rate 

Cap Increased 

Dramatically with 

Automatic Eligibility 

Checks
Page 14 GAO-17-4 Federal Student Loans

eligible federal loans retroactively for those qualifying periods of service.27

As a result, some servicemembers were eligible to receive the rate cap 

for months going forward and also retroactively for months in which they 

were previously eligible. Recently, in response to findings from a report 

issued by Education’s Office of Inspector General, the agency required 

federal loan servicers to identify all servicemembers with qualifying 

military service back to August 2008, including those that were not 

identified in the initial website checks, and automatically apply the interest 

rate cap retroactively to their eligible federal loans by December 2016.28

Data from the federal loan servicers show that the number of 

servicemembers who received the SCRA interest rate cap on their federal 

student loans for December 2015 was dramatically higher than for 

October 2008, with the increase driven by federal loan servicers using the 

SCRA website to identify qualifying servicemembers and automatically 

apply the cap to their eligible federal loans (see fig. 2).29 (For additional 

information on servicemembers who received the cap, see appendix II.)

 27In 2014 Education began requiring federal loan servicers to match borrowers with 

federal student loans against the SCRA website using an initial query date of July 1, 2014. 

Because the SCRA website identifies servicemembers who have qualifying military 

service within 367 days of the servicer’s query date, it identified servicemembers who had 

qualifying military service between June 29, 2013 and July 1, 2014. Education directed the 

federal loan servicers to automatically apply the interest rate cap back to the active duty 

begin date or August 14, 2008, whichever was more recent. 

28See Department of Education, Office of Inspector General, Servicemembers Civil Relief 

Act, (Washington, D.C.: February 29, 2016). In response to this Inspector General report 

and follow-up requests from Congress, Education has asked the federal student loan 

servicers to do a retroactive look back to grant the benefit to eligible servicemembers who 

did not receive the SCRA rate cap during the time in which they were eligible for the cap. 

29These counts reflect the number of servicemembers who received the rate cap at any 

point during the month, as well as those who received the cap retroactively for that month 

if they were identified at a later date as having been eligible. Because some loans were 

transferred between servicers during our review time frame, our numbers may include 

duplicate counts for borrowers who had the cap applied by more than one servicer. 

According to data from Education’s National Student Loan Data System, 2 percent of 

federal loans were transferred in fiscal year 2009 and 5 percent were transferred in fiscal 

year 2015 (for additional information, see appendix I). While servicemembers no longer 

need to provide written notice of eligibility to receive the rate cap for federal loans, officials 

from a federal loan servicer that implemented the automatic website checks in 2014 said 

they continued to receive a number of written notices from servicemembers via email, 

mail, and fax in 2015.
Page 15 GAO-17-4 Federal Student Loans

Figure 2: Number of Servicemembers with Federal Student Loans Who Received the Servicemembers Civil Relief Act (SCRA) 

Interest Rate Cap for Each Month, by Identification Method, October 2008 to December 2015

Note: Of the 107 servicemembers who received the SCRA rate cap for October 2008, 49 

servicemembers received the SCRA rate cap via written notice, and 58 received it via an automated 

process using the SCRA website. In December 2014 the Department of Education issued the final in 

a series of updates to its contracts with the 10 federal student loan servicers directing them to use 

DOD’s SCRA website on a monthly basis.

The sidebar illustrates the potential financial impact of the interest rate 

cap on an individual servicemember’s federal student loan.

Some of the servicers had sought to implement the automatic website 

checks earlier. For instance, in June 2011, four trade associations 

representing student loan servicers jointly requested permission from 

Education to conduct SCRA website eligibility checks. Education denied 

the request, stating that the act specifically required servicemembers to 

apply in writing for the rate cap. Then DOJ, in its 2014 settlement with a 

federal loan servicer for potential violations, interpreted SCRA as allowing 

the servicer to use the SCRA website to confirm borrowers’ eligibility and 

Financial Impact of the SCRA Interest 

Rate Cap on Three Hypothetical 

Servicemembers

All three servicemembers borrow $40,000 in 

federal loans at 6.8 percent interest—the 

most common pre-cap interest rate for 

federal loans—and repay the loans under the 

10-year standard repayment plan.

• Borrower A received the rate cap

for 24 months, beginning after 7 years

in repayment.

Total reduction in payment: $172

• Borrower B received the rate cap

for 24 months, beginning after 1 year

in repayment.

Total reduction in payment: $611

• Borrower C received the rate cap

for 40 months, beginning after 1 year

in repayment.

Total reduction in payment: $942

Source: GAO analysis. | GAO-17-4
Page 16 GAO-17-4 Federal Student Loans

to ascertain active-duty begin and end dates.30 Education officials said 

because SCRA is under DOJ’s enforcement jurisdiction, they deferred to 

DOJ’s decision to allow the servicers to use the SCRA website.

The number of servicemembers with commercial FFEL loans who 

received the SCRA interest rate cap also increased after most federal 

student loan servicers began using the SCRA website to automatically 

identify borrowers with active military service qualifying them for the rate 

cap and apply it to their eligible commercial FFEL loans. Loan servicers 

were not required to use the website checks for commercial FFEL loans 

until July 1, 2016, and could instead require written notice from 

servicemembers until that date. But Education authorized and 

encouraged servicers to use the automatic website checks for 

commercial FFEL loans when it required them for federal student loans in 

2014.31 When some federal loan servicers began using the SCRA 

website for borrowers with commercial FFEL loans, they identified 

 30DOJ’s consent order with one of the federal loan servicers prior to Education’s 

requirement for loan servicers to automatically identify eligible federal and commercial 

FFEL borrowers still required borrowers to provide proof of military service. It stated that 

the one servicer shall accept military orders as written notice of eligibility for the SCRA 

interest rate cap via facsimile, mail, or overnight delivery; shall accept, in lieu of military 

orders, any letter on official letterhead from a servicemember’s commanding officer that 

sets forth the full name and Social Security number or date of birth of the servicemember 

and the dates of military service, and shall accept servicemembers’ requests for a military 

deferment or forbearance as written notice of eligibility for reduced interest rates pursuant 

to SCRA. This servicer was also directed to create an online intake form that would be 

accepted as written notice of eligibility for the rate cap. Once a borrower provides notice of 

military service—through the online intake form or otherwise—the servicer would check 

the SCRA website to confirm eligibility and apply the cap, using the website to identify 

beginning and end of active-duty dates. 

31Student Assistance General Provisions, Federal Family Education Loan Program, and 

William D. Ford Federal Direct Loan Program, 80 Fed. Reg. 67,204, 67,237 (Oct. 30, 

2015) (codified at 34 C.F.R. § 682.208(j)); Office of Federal Student Aid, Improved 

Administration of the Servicemembers Civil Relief Act for Borrowers Under the William D. 

Ford Direct Loan and Federal Family Education Loan Programs, DCL ID: GEN-14-16 

(Aug. 25, 2014). Representatives from 8 of the 10 federal loan servicers said they 

implemented the automatic eligibility checks for commercial FFEL loans between July 

2014 and June 2015, more than a year ahead of schedule. Of the remaining 2 servicers, 

one implemented the automatic eligibility checks for commercial FFEL loans on July 1, 

2016, and the other did so in August 2016. Representatives from the servicer that 

implemented the automatic eligibility checks in August 2016 said they required additional 

time to implement the change to their data system in order to automatically apply the 

SCRA cap.

Number of 

Servicemembers with 

Commercial FFEL Loans 

Who Received the Rate 

Cap Increased with Early 

Implementation of 

Automatic Eligibility 

Checks
Page 17 GAO-17-4 Federal Student Loans

servicemembers with active military service start dates as early as 2008, 

when the SCRA rate cap first applied to commercial FFEL loans, and 

applied the cap retroactively for those qualifying periods of service. As a 

result, some servicemembers were eligible to receive the rate cap on a 

commercial FFEL loan for months going forward and also retroactively for 

months in which they were previously eligible.32

According to data from the federal loan servicers, who serviced at least 

77 percent of the outstanding balance of commercial FFEL loans as of 

December 31, 2015, the number of servicemembers who received the

SCRA interest rate cap on their commercial FFEL loans for December 

2015 was much higher than the number who received the cap for October 

2008, with the increase mostly driven by federal loan servicers using the 

SCRA website to identify qualifying servicemembers and automatically 

apply the cap to their eligible commercial FFEL loans (see fig. 3).33 (For 

additional information on servicemembers who received the cap, see 

appendix II.)34 Data were not readily available on the remaining share of 

 32In 2016, when Education required that by December 31, 2016, federal loan servicers 

retroactively apply the interest rate cap to the eligible federal loans of all servicemembers 

with active duty start dates as early as mid-2008, it was still determining the process for 

retroactively granting the SCRA cap to all qualifying servicemembers’ eligible commercial 

FFEL loans. 

33Data on the commercial FFEL loans serviced by one of the federal student loan 

servicers are not included in our calculation of the percentage of the commercial FFEL 

market serviced by the federal loan servicers because Education officials did not provide 

us with these data. This servicer’s commercial FFEL loans are included in our analysis of 

servicemembers with commercial FFEL loans who received the SCRA rate cap, because 

the servicer provided us with these record-level data. 

34These monthly counts of the number of servicemembers who received the rate cap via 

the SCRA website include servicemembers who received the rate cap during the month in 

which they were actually eligible, as well as those who received the cap retroactively for 

that month. Data on the share of commercial FFEL loans serviced by federal loan 

servicers is from Education’s National Student Loan Data System. Because some loans 

were transferred between servicers during our review time frame, our numbers may 

include duplicate counts for borrowers who had the cap applied by more than one 

servicer. According to data from Education’s National Student Loan Data System, 12 

percent of commercial FFEL loans were transferred between servicers in fiscal year 2009 

and 3 percent were transferred in fiscal year 2015. (For additional information, see 

appendix I.) As with federal loans, servicemembers no longer need to provide written 

notice to receive the rate cap for commercial FFEL loans. Nevertheless, officials from a 

federal loan servicer that implemented the automatic website checks in 2014 said they 

continued to receive a number of written notices from servicemembers in 2015.
Page 18 GAO-17-4 Federal Student Loans

the commercial FFEL market serviced by non-federal loan servicers. In 

addition, the number of outstanding commercial FFEL loans decreased 

from 2008 to 2015, primarily due to the termination of Education’s 

authority to make or insure FFEL loans, effective July 1, 2010.35

Figure 3: Number of Servicemembers with Commercial Federal Family Education Loans (FFEL) Who Received the 

Servicemembers Civil Relief Act (SCRA) Interest Rate Cap for Each Month, by Identification Method, October 2008 to 

December 2015

Note: We calculated these monthly counts of servicemembers using data on commercial FFEL loans 

from the federal loan servicers, who serviced at least 77 percent of the outstanding loan balance of 

commercial FFEL loans as of December 31, 2015. Data were not readily available on the remaining 

share of the commercial FFEL market. While loan servicers were not required to use the website 

checks for commercial FFEL loans until July 1, 2016, representatives from 8 of the 10 federal loan 

servicers said they implemented the automatic eligibility checks for commercial FFEL loans between 

July 2014 and June 2015. Of the remaining 2 servicers, one implemented the automatic eligibility 

checks for commercial FFEL loans on July 1, 2016 and the other did so in August 2016.

 35According to data from Education’s National Student Loan Data System, in fiscal year 

2009, there were 48,893,421 commercial FFEL loans that had an outstanding balance at 

any point during the year and were serviced by the federal loan servicers or had been 

transferred to Education’s defaulted loan information system. In fiscal year 2015, there 

were 28,021,050 such commercial FFEL loans.
Page 19 GAO-17-4 Federal Student Loans

Although the automatic eligibility check for the SCRA interest rate cap is 

not required for private student loans, the number of servicemembers 

who received the cap on at least one of their private loans increased for 6 

lenders who have voluntarily implemented automatic SCRA website 

checks. The number of servicemembers who received the cap on at least 

one of their private student loans more than doubled, from 14,970 to 

33,309 from September 2014 to March 2016, according to data from 6 

lenders who together accounted for 65 percent of the private student loan 

market.36 According to the 6 lenders, the servicers they use for their 

private student loans all began voluntarily using the SCRA website to

check for eligible servicemembers as of June 2015.37 Because limited 

data are available on loan servicing for the private student loan market 

not covered by the 6 lenders (about 35 percent), it is unclear how many 

servicemembers are receiving the cap for any private loans handled by 

the other servicers.38

 36We received aggregate private student loan data from the 6 lenders via a private-sector 

company that represents them. The data show that as of March 31, 2016, these 6 lenders 

held $66.5 billion in outstanding private student loans, or 65 percent of the $102 billion in 

outstanding private student loan debt. Because borrowers may have private student loans 

with more than one of the 6 lenders, the counts of servicemembers who received the rate 

cap likely include some who were counted more than once. Because 2014 was when 

Education required that federal loan servicers use the SCRA website checks for federal 

student loans on a monthly basis, we collected these data on private student loans 

beginning with the end of fiscal year 2014 and ending with the second quarter in fiscal 

year 2016 to see if the number of borrowers receiving the cap for private loans was also 

increasing over this period. (For additional information, see appendixes I and II).

37According to the 6 lenders, all but one of these servicers implemented the automatic 

eligibility checks as of December 2014, with the final servicer implementing them as of 

June 2015. Some of the 6 lenders service their own private loans, while others contract 

with one or more loan servicers to service them. In addition, representatives from the 10 

federal loan servicers said they were also voluntarily using the SCRA website as of 

August 2016 for the private loans they serviced. While we collected data on the share of 

the private loan market serviced by these 10 federal loan servicers, and on the number of 

borrowers and loans who received the SCRA rate cap, because 3 of the 10 federal loan 

servicers also service some loans for the 6 private lenders, we were not able to determine 

the extent of the overlap in private loans. 

38Banks are not required to report granular data on student loans to federal financial 

regulators. Instead, banks report a data field called “other consumer loans” which can 

include real estate loans and auto loans as well as student loans.

Number of 

Servicemembers with 

Private Loans Who 

Received the Rate Cap 

Also Increased
Page 20 GAO-17-4 Federal Student Loans

Consumer information provided to servicemembers about the SCRA 

interest rate cap is sometimes inaccurate. Under SCRA, the military 

branch secretaries have primary responsibility for ensuring that 

servicemembers receive pertinent information on their SCRA benefits.39

However, a key source of information for servicemembers, DOD’s Military 

OneSource website, incorrectly states that the SCRA cap does not apply 

to commercial FFEL student loans incurred prior to active military service. 

Further, DOD provided us with 8 documents it uses to inform 

servicemembers, military legal aid attorneys, officials who examine 

financial institutions, and others about servicemembers’ SCRA benefits. 

Our review of these documents, prepared by various offices and 

branches within DOD, found that all contained significant inaccuracies.

For example, 6 of the 8 documents specify that the servicemember must 

provide written notice to obtain the cap and provide military orders, and 3 

of those 6 say that the request must be made within 180 days of the end 

of military service—requirements that no longer apply to federal or 

commercial FFEL loans. In addition, 2 of the 8 documents specifically 

state that the SCRA rate cap does not apply to student loans. Inaccurate 

information could be especially problematic for servicemembers with 

private student loans because, unlike for federal and commercial FFEL 

loans, servicers of private student loans are not required to automatically 

identify and apply the cap to borrowers’ eligible loans.

 39SCRA requires that servicemembers receive written notice of the benefits provided 

under SCRA as well as information on SCRA rights and protections during initial 

orientation training and at other times a military branch secretary considers appropriate. 

50 U.S.C. §§ 3915 and 3916. DOD officials told us they discuss the SCRA interest rate 

cap with servicemembers as part of DOD’s financial awareness training, and that SCRA is 

part of its training for military legal aid attorneys and others who work with 

servicemembers on financial benefits.

Servicemembers 

Face Challenges 

Obtaining the SCRA 

Interest Rate Cap for 

Student Loans

Servicemembers Receive 

Inaccurate Information 

about the Cap
Page 21 GAO-17-4 Federal Student Loans

In acknowledging these inaccuracies, DOD officials told us that the

department needs to work across functional areas and military 

installations to ensure that DOD information on the SCRA rate cap is 

correct and uniform for all servicemembers. DOD recently combined 

many of its financial readiness initiatives under one office, which officials 

said they expect to result in more accurate and consistent SCRA 

materials across military installations, but the effect of this consolidation is 

not yet known. Federal internal control standards state that agencies 

should externally communicate the information necessary to achieve their 

objectives, but inaccurate information about the SCRA rate cap not only 

falls short of those standards, it may also prevent some servicemembers 

who have private student loans from receiving a benefit for which they are 

eligible.40

There is a risk that not all servicemembers who are eligible for the SCRA 

interest rate cap are receiving it on their private student loans for several 

reasons. First, the automatic eligibility check is not required for private 

loans, so the extent to which the rate cap is being applied to 

servicemembers’ private student loans is unknown. The private student 

loan market comprised approximately $102 billion in student loans, about 

7.6 percent of the total student loan market, as of March 31, 2016. The 6 

lenders of private student loans for whom we received data are voluntarily 

identifying eligible servicemembers and providing the rate cap through the 

automatic eligibility check. Our analysis of data from these 6 lenders 

showed that the number of borrowers receiving the SCRA rate cap on 

private student loans more than doubled once these servicers started 

using the automated process. These lenders’ loans represent about 65 

percent of the private student loan market, or about $66 billion as of 

March 2016. Information on the remaining 35 percent of the private 

student loan market, or about $36 billion as of March 2016, was not 

available with regard to whether the lenders or servicers use the 

automated process.

Second, representatives from the four veteran service organizations we 

spoke with told us that the SCRA interest rate cap is not well publicized 

 40GAO, Standards for Internal Control in the Federal Government, GAO/AIMD-00-21.3.1

(Washington, D.C.: November 1999).

Eligible Servicemembers 

Are at Risk of Not 

Receiving the Rate Cap 

for Some Private Student 

Loans
Page 22 GAO-17-4 Federal Student Loans

and that many servicemembers are not aware of the benefit. One 

representative said that while implementation of the automatic eligibility 

checks has been relatively smooth for federal and commercial FFEL 

loans, it has caused confusion because of the different requirement to 

obtain the same rate cap for private loans. Although SCRA states that 

during active military service the interest rate of a servicemember’s debt 

shall not exceed 6 percent, those servicemembers with private student 

loans are at risk of not receiving the cap if they do not know how to obtain 

it and their loan servicer does not automatically apply it.

There are also indications that private student loans may be more 

susceptible to SCRA rate cap violations than other types of loans. In 

DOJ’s 2014 settlement with one of the federal student loan servicers, 

nearly three-fourths of DOJ’s settlement of borrower claims—about $45 

million—went to borrowers with private student loans, while just onefourth went to servicemembers with federal loans or commercial FFEL 

loans.41 In 2015, Education, the CFPB, and the Department of the 

Treasury issued a joint policy stating that common student loan servicing 

functions should be consistent for all student loans.42 However, without a 

requirement that loan servicers automatically identify eligible 

servicemembers and apply the interest rate cap for private student loans, 

servicemembers with private loans may not be receiving the interest rate 

cap for which they are eligible in a manner consistent with those who 

have federal and commercial FFEL loans.

DOJ has proposed changes to SCRA’s statutory language to explicitly 

allow a servicemember’s oral rather than written notice of eligibility to

obtain the interest rate cap.43 Additionally, the proposal would eliminate 

the provision that servicemembers provide the creditor a copy of their 

 41According to CFPB officials, their referral of one of the federal student loan servicers to 

DOJ for possible SCRA violations was one of the reasons for DOJ’s investigation of the 

servicer. 

42Consumer Financial Protection Bureau, Department of Education, Department of the 

Treasury, Joint Statement of Principles on Student Loan Servicing (September 2015). 

43The rate cap for an obligation or liability of the servicemember would have to be 

requested not later than 180 days after the date of the servicemember’s termination or 

release from military service.
Page 23 GAO-17-4 Federal Student Loans

military orders.44 While these changes, if enacted, would remove the 

burden on servicemembers with private loans of having to provide written 

notice of their military status, they would still need to be aware of the cap 

and orally provide notice of their status to their loan servicer. Alternatively, 

requiring the automatic eligibility check for private student loans would 

better ensure that all servicemembers with private student loans are 

receiving a benefit for which they are eligible and that the interest rate cap 

is applied consistently across all types of student loans.

Education, as part of its oversight of federal student loan servicers, uses 

a variety of mechanisms to oversee how servicers apply the SCRA 

interest rate cap for federal student loans and commercial FFEL loans 

held by eligible servicemembers. However, Education does not 

systematically track SCRA-specific borrower complaints.

Education has established several mechanisms to oversee whether 

federal student loan servicers are properly applying and removing the rate 

cap for federal and commercial FFEL student loans:

 44According to DOJ officials, on Nov. 10, 2015, DOJ transmitted its Servicemembers 

Legislative Package for the 114th Congress. This proposed process is different from the 

requirements of DOJ’s 2014 settlement with one of the federal loan servicers, and is also 

different from the automatic eligibility check that is being used for federal and commercial 

FFEL student loans in that the servicemember would be able to provide oral notice of 

eligibility for the cap instead of written notice of eligibility. 

Federal Agencies Use 

Various Mechanisms 

to Oversee 

Application of the 

Interest Rate Cap for 

Student Loans, but 

Limitations Exist

Education Oversees 

Application of the Rate 

Cap for Federal Loans and 

Commercial FFEL Loans, 

but Lacks a Systematic 

Way to Track Complaints

Education’s SCRA Oversight 

Mechanisms
Page 24 GAO-17-4 Federal Student Loans

• Reviews of federal loan servicers: In February 2015, Education 

indicated it created a loan servicer monitoring group of 10 monitors 

and 1 supervisor to oversee servicing activity for federal student 

loans.45 This group reviews borrower accounts, and implementation of 

the SCRA rate cap is one of its core functions. The first set of reviews 

in 2015 found that 332 of the 335 borrower accounts reviewed had 

correctly processed rate caps under the automatic eligibility check, 

according to the review reports. Servicers did not correctly process 3 

accounts: in 2 cases borrowers were not notified that their rate had 

been reduced, and in 1 case the rate reduction was applied 

retroactively to a date prior to when the loan was eligible for the cap. 

The second set of reviews was completed in April 2016, and the 

review reports show that all 300 reviewed borrower accounts had the 

rate cap properly applied, had correct beginning and end dates (if 

applicable), and had borrowers who were notified about application of 

the cap.

• Data reporting: Federal student loan servicers provide Education with 

monthly reports of all federal student loan borrowers who fall into a 

“Service Members category,” which includes servicemembers who are 

SCRA eligible.46 In addition, servicers report weekly to Education the 

date they applied the rate cap for each servicemember who is 

receiving the cap, the date the cap was ended, and the date the 

servicemember was notified of the cap. Education is using this 

information to track the number of borrowers who have military 

service qualifying them for the rate cap.

• Technical assistance for loan servicers: In early 2015, when working 

with loan servicers to implement the automatic eligibility check for 

federal loans, Education hosted conference calls with the servicers 

and reached out to DOD for clarification when needed. 

Representatives of 7 of the 10 federal student loan servicers said 

such calls were useful, and two also noted that they also have a 

 45This group is named the “Kansas City Servicer Monitoring Team” and is part of the 

Office of Federal Student Aid’s Business Operations Group, which is separate from the 

Program Compliance group. 

46The “Service Members category” includes borrowers who are receiving the SCRA 

interest rate cap or those who are eligible but whose loans are already at or under 6 

percent, as well as servicemembers who are in a military service or post-active-duty 

deferment period, or who are receiving the hostile pay benefit of no interest accrual while 

serving in hostile areas. 
Page 25 GAO-17-4 Federal Student Loans

liaison at Education whom they can contact about questions or 

challenges. According to Education officials, the agency is continuing 

to provide technical assistance on the website match, such as working 

on updated guidance for servicers to help resolve non-matches due to 

marital or hyphenated last names. In addition, Education officials 

explained that staff listen to a sample of incoming and outgoing calls 

between servicers and servicemember borrowers, to ensure accuracy 

and completeness of provided information. Feedback is provided to 

servicers through meetings and a written report, and servicers make 

required changes or provide employee training to correct deficiencies, 

Education officials said.

• Agency-wide oversight board: Education has an internal board 

comprised of staff from different units and groups within Education’s 

Office of Federal Student Aid (e.g., Chief Financial Officer, Program 

Compliance Staff) that has met periodically since 2012 to coordinate 

loan servicer monitoring activities. The agenda for the October 2014 

monthly meeting included implementation of the automatic eligibility 

check for federal loans.

• Program compliance reviews: Education included implementation of 

the automatic eligibility check as part of its review of the loan servicers 

that had an annual compliance review scheduled in 2015 or 2016 to 

look at how the federal student loan servicers were implementing the 

revised automatic eligibility check.47 In the three review reports 

provided to GAO, one servicer did not properly apply the SCRA rate 

 47These reviews are conducted by the Office of Federal Student Aid’s Office of Program 

Compliance. In addition to the 2015 and 2016 annual compliance reviews, in 2014 and 

2015, Education conducted reviews to specifically examine how well each federal and 

commercial student loan servicer was implementing the SCRA interest rate cap under the 

old process, in which borrowers had to provide written notice of eligibility for the rate cap 

and provide a copy of military orders. According to Education officials, these reviews 

found that the servicers were appropriately implementing the SCRA rate cap based on 

written requests from borrowers. According to agency officials, the agency has conducted 

annual compliance reviews of the 4 Title IV servicers since 2010, and of the 6 not-for-profit 

servicers since 2013, when they first started servicing federal student loans, as part of its 

monitoring strategy. These reviews are done on site at the servicer’s physical location, 

and generally focus on loan originations, conversions from in school status to repayment, 

deferment, forbearance, income-driven repayment, and the SCRA. One official noted that 

Education reviewed the 4 Title IV servicers and the not-for-profits that service at least 

300,000 borrower accounts annually, and the not-for-profits that service fewer than 

300,000 account during the first year each entity reaches 100,000 accounts, and then as 

requested by the Office of Federal Student Aid. According to Education officials, in FY17 

Education will review all the federal student loan servicers.
Page 26 GAO-17-4 Federal Student Loans

cap for a reservist who had been called to active duty military service. 

No other SCRA-related issues were identified for these three 

servicers in the reports.48

In addition to these efforts, Education tracks and resolves borrower 

complaints about federal and commercial FFEL student loans it receives 

directly, but does not track the number of SCRA-specific complaints. 

Education officials said they generally receive complaints from borrowers 

who believe their issue was not satisfactorily resolved by a servicer or 

who are reluctant to submit a complaint to a servicer. Until July 1, 2016, 

Education recorded borrower complaint information through a dozen 

different systems within the agency, including the Ombudsman’s 

complaint tracking system and the Office of Program Compliance’s 

Complaint Tracking System.49 While borrowers could contact Education 

with SCRA-related complaints, officials said the agency did not 

specifically track the number of SCRA complaints it received across all its 

complaint systems.50

In March 2015, the President signed a Student Aid Bill of Rights which 

required Education by July 1, 2016 to develop and implement a simple 

 48A member of a reserve component who is ordered to report for military service is eligible 

for certain SCRA protections, including the loan cap, during the period beginning on the 

date of the member’s receipt of the order and ending on the date on which the member 

reports for military service (or, if the order is revoked before the member reports, on the 

date on which the order is revoked). 50 U.S.C. § 3917(a).

49For related information, see GAO, Federal Student Loans: Education Could Improve 

Direct Loan Program Service and Oversight, GAO-16-523 (Washington, D.C.: May 16, 

2016). The Office of Federal Student Aid Ombudsman uses informal dispute resolution 

processes to address complaints about the federal student aid programs, including the 

Direct Loan program. According to Education officials, the agency also receives 

complaints, referrals, and inquiries regarding student loan programs through its Program 

Compliance Complaint Tracking System. Complaints originate from several sources, 

including borrowers, loan servicers, and schools.

50According to Education officials, the Ombudsman’s tracking system has a field identified 

as “Special Category” which is used on a situational basis to highlight certain types of 

complaints. “SCRA” is included on this list, and will be selected when a complainant 

specifically references being denied SCRA benefits, or if the Ombudsman determines that 

those benefits have been denied to a complainant. However, this tracking depends on a 

complainant mentioning SCRA, or an Ombudsman’s determination of a complaint as 

SCRA-related. Education’s other student loan complaint tracking systems did not track 

SCRA-related complaints. The Program Compliance Complaint Tracking System 

generally handles complaints against institutions of higher education. 

Education’s Process for 

Tracking Student Loan 

Complaints
Page 27 GAO-17-4 Federal Student Loans

process for borrowers to file complaints and for Education to track their 

resolution.51 The agency completed design of the new system and started 

using it in July 2016. While the system is designed to generate more 

robust, standardized information on borrower complaints, Education 

officials said it does not systematically track SCRA-related complaints.

Under the new system, when complainants enter their contact information 

online, they can choose to self-identify as “a servicemember or veteran”

using a check box, as appropriate, but this is an optional data field. There 

are also two options in a drop-down menu categorizing complaint type 

that Education officials said are appropriate for SCRA-related complaints: 

“Military and Veteran Benefits” and “Loan Interest Rate,” but neither is 

specific to SCRA complaints. In addition, there is a blank text box in 

which complainants could opt to specify that their issue is SCRA related. 

Education officials said they could determine the volume of SCRA 

complaints by running a report on complaints with “SCRA” in the text box. 

However, this approach relies on borrowers to enter SCRA in the text 

box. Also, not all servicemembers may know how to refer to the rate cap 

benefit by its actual name or acronym.

While Education has taken steps to improve and streamline how it tracks 

borrower complaints, without a way to systematically identify SCRArelated complaints Education will not be able to evaluate the effectiveness 

of its efforts to oversee these benefits or be able to use this information to 

improve service to borrowers who are servicemembers. For example, the 

agency will not know if the frequency of SCRA complaints for commercial 

FFEL loans decreased as servicers implemented the automatic eligibility 

check for these loans. In addition, federal internal control standards state 

that an agency’s management should analyze and discuss information 

related to achieving agency goals.52 One of Education’s strategic 

objectives is to provide superior service and information to borrowers, and 

not having information on the extent of SCRA-related complaints can 

hinder the agency’s ability to provide this level of customer service. In 

addition, Education has identified having a unified borrower complaint 

 51Presidential Documents, Memorandum of March 10, 2015–Student Aid Bill of Rights to 

Help Ensure Affordable Loan Repayment, 80 Fed. Reg. 13,475, 13,475-76 (March 13, 

2015).

52GAO/AIMD-00-21.3.1.
Page 28 GAO-17-4 Federal Student Loans

tracking system as a key mechanism to enhance oversight and customer 

service.53 However, Education will not be able to fully respond to 

servicemembers’ SCRA-related issues without knowing details about or 

frequency of these types of complaints.

The current roles of CFPB, the four federal financial regulators, and DOJ

with regard to SCRA compliance result in an oversight gap because no 

agency is currently authorized to routinely oversees SCRA compliance for 

private student loans made or serviced by nonbank lenders and servicers 

(see fig. 4). By routine oversight, we are referring to onsite reviews to 

specifically look for instances of noncompliance with SCRA by nonbank 

private student loan lenders and servicers. Nonbank lenders include 

institutions of higher education and private companies that are not banks. 

According to CFPB, the nonbank student loan servicers include the seven 

largest student loan servicers.54 While the proportion of private student 

loans that are made or serviced by nonbanks is unknown, as of March 

2016, the total private student loan market had an outstanding balance of 

about $102 billion, and available data show that interest rates on such 

loans can range from about 3 to 19 percent. While Education routinely 

monitors the application of the SCRA cap for federal and commercial 

FFEL loans, it does not do so for any private loans serviced by these 

companies.

 53Department of Education, Strengthening the Student Loan System to Better Protect All 

Borrowers (Washington, D.C.: Oct. 1, 2015).

54Nonbank servicers include the 10 companies that Education contracts with to service 

federal student loans, all of which also service private student loans.

Defined Roles of Multiple 

Agencies Leave a Gap in 

SCRA Oversight
Page 29 GAO-17-4 Federal Student Loans

Figure 4: Private Student Loan Oversight Responsibilities of Federal Agencies for the Servicemembers Civil Relief Act (SCRA)

Note: CFPB has supervisory authority over entities that are insured depository institutions and credit 

unions (and the affiliates of those depository institutions and credit unions) with assets of more than 

$10 billion for the enumerated consumer financial protection laws, and the authority to supervise 

other nonbank student loan lenders and certain large nonbank servicers (those with over 1 million 

borrower accounts, regardless of whether the loans are private, federal, or commercial FFEL). 12 

U.S.C. §§ 5515 and 5514(a)(1)(D). However, CFPB does not have the authority to oversee SCRA 

compliance because SCRA is not one of the enumerated consumer financial protection laws. The 

four federal prudential financial regulators have broad examination and enforcement authority for 

insured depository institutions and credit unions with assets of $10 billion or less (small banks), as 

well as general supervisory authority, including supervision for the enumerated consumer financial 

protection laws. Through their general supervisory authority, the four federal financial regulators can 

also take action to enforce SCRA compliance at all depository institutions and credit unions, 

regardless of asset size, and at the depository institutions’ institution-affiliated parties. However, they 

do not have the authority to oversee SCRA compliance for nonbank private student loan lenders or 

servicers, unless those entities are acting on behalf of the regulated entities, or, in certain instances, 

other third-party service providers to regulated entities.12 U.S.C. §§ 1752, 1756, 1813(q), (u) 1820(b), 

1861-1867, and 5516(a)-(d).

As part of its oversight responsibility, CFPB collects borrowers’ student 

loan complaints and reports on issues facing private student loan 

borrowers, including military borrowers, through its Ombudsman and
Page 30 GAO-17-4 Federal Student Loans

Office of Servicemember Affairs. CFPB also oversees the student loan 

lending and servicing operations of large banks and their affiliates (large 

bank lenders and servicers), nonbanks that make private student loans 

(nonbank lenders), and certain large nonbank student loan servicers 

(nonbank servicers) for compliance with certain federal consumer 

financial laws, through onsite examinations.55 However, because SCRA is 

not one of the federal consumer financial laws whose oversight was 

transferred to CFPB, the bureau does not have the authority to routinely 

oversee SCRA compliance by student loan lenders and servicers, and 

does not inspect SCRA compliance during its onsite reviews.56

The four federal financial regulators—Federal Deposit Insurance 

Corporation, Board of Governors of the Federal Reserve System, 

National Credit Union Administration, and Office of the Comptroller of the 

Currency—have broad authority to review the banking activities of 

regulated entities’—insured depository institutions, credit unions, and their 

affiliates—including compliance with certain applicable laws, such as 

 5512 U.S.C. §§ 5515 and 5514(a)(1)(D); see also 12 U.S.C. § 1813(u). CFPB has 

supervisory authority over entities that are insured depository institutions and credit unions 

with assets of at least $10 billion—large bank student loan lenders and servicers. CFPB 

also has the authority to supervise other nonbank student loan lenders and certain large 

nonbank servicers (those with over 1 million borrower accounts, regardless of whether the 

loans are private, federal, or commercial FFEL). Defining Larger Participants of the 

Student Loan Servicing Market, 78 Fed. Reg. 73,383, 73,395-97 (Dec. 6, 2013) (codified 

at 12 C.F.R. § 1090.106(b)).

5612 U.S.C. § 5481(12), (14). The SCRA is not included among the enumerated federal 

consumer financial laws for which the Dodd-Frank Act gives the CFPB exclusive authority 

to conduct compliance examinations at insured depository institutions and credit unions 

with total assets of greater than $10 billion. 12 U.S.C. §§ 5481(12), (14) and 5515. CFPB 

officials said if they come across possible SCRA violations during reviews of bank student 

loan lenders or servicers, they would refer the matter to DOJ, or one or more of the four 

federal financial regulators for banks—Federal Deposit Insurance Corporation, Federal 

Reserve System, National Credit Union Administration, or Office of the Comptroller of the 

Currency.
Page 31 GAO-17-4 Federal Student Loans

SCRA.57 According to agency officials, they also have enforcement 

authority over institution-affiliated parties, and in certain instances, over 

third-party service providers, including reviewing compliance with the 

SCRA rate cap for student loans.58 However, the regulators do not have 

the authority to routinely oversee whether nonbank student loan lenders 

or servicers comply with the SCRA rate cap for private student loans.59

 57These four agencies are referred to as the federal prudential regulators and they have 

broad supervisory and enforcement authority over insured depository institutions and 

credit unions. For the enumerated consumer financial protection laws, these regulators 

oversee compliance by depository institutions and credit unions with assets of $10 billion 

or less, with CFPB overseeing compliance at institutions larger than $10 billion. However, 

because SCRA was not among the enumerated consumer protection laws transferred to 

CFPB, through their general supervisory authority the four financial regulators can take 

actions to enforce SCRA compliance at the depository institutions, savings associations, 

and credit unions that they oversee, and at their institutional-affiliated parties. However, 

the federal financial regulators do not have jurisdiction over nonbank private student loan 

lenders or servicers, unless those servicers are acting on behalf of depository banks, 

savings associations, or credit unions. The Federal Deposit Insurance Corporation

supervises Federal Deposit Insurance Corporation-insured state-chartered banks that are 

not members of the Federal Reserve System, as well as state savings associations, their 

institution-affiliated parties, and in certain circumstances other third-party service 

providers. The Board of Governors of the Federal Reserve System supervises statechartered banks that opt to be members of the Federal Reserve System, bank holding 

companies, savings and loan holding companies, and the nondepository institution 

subsidiaries of those depository institutions, and savings and loan holding companies. The 

National Credit Union Administration charters and supervises federally chartered credit 

unions and insures deposits in federal and most state-chartered credit unions. The Office 

of the Comptroller of the Currency charters and supervises national banks and federal 

savings associations. See GAO-12-700.

5812 U.S.C §§ 1813(u), 1820(b)(4), and 1861-1867. 

59According to Federal Deposit Insurance Corporation and Federal Reserve System 

officials, the agencies do not have oversight responsibility of nonbank student loan lenders 

that they do not supervise, as previously described, but may have some enforcement 

authority over nonbank servicers if they are affiliated with depository institutions, as 

defined in section 3(u) of the Federal Deposit Insurance Act, or as subject to the Bank 

Service Company Act. According to Federal Deposit Insurance Corporation and Federal 

Reserve officials, if, in the course of their oversight of regulated institutions they become 

aware of a possible SCRA violation by a third party service provider, they might designate 

that party as an affiliate of the bank and investigate for possible enforcement action, but 

they do not regularly oversee the activities of nonbank student loan lenders and servicers. 

Similarly, the Office of the Comptroller of the Currency would have oversight authority over 

nonbank subsidiaries of national banks and federal savings associations, according to 

agency officials.
Page 32 GAO-17-4 Federal Student Loans

DOJ has specific authority to enforce SCRA based on referrals of 

possible violations, but does not conduct onsite reviews of student loan 

lenders or servicers to check for SCRA compliance, including lenders and 

servicers of private student loans.60 According to DOJ officials, they ask 

servicemembers to first go through DOD’s military legal assistance 

system to resolve SCRA complaints, including those concerning private 

student loans. If the military system is unable to resolve the complaint, it 

is referred to DOJ, which may open a formal investigation and/or file a 

lawsuit. However, referrals from DOD would only capture cases in which 

a servicemember knew about the rate cap for private student loans and 

believed that it had been erroneously denied. Currently, because of the 

statutorily defined roles of each agency, no agency can routinely 

oversees SCRA compliance by certain nonbank private student loan 

lenders and servicers by, for example, conducting onsite file reviews. 

Because of this, there is a risk that SCRA violations for private student 

loans will go undetected, potentially leaving some servicemembers 

without a benefit for which they are eligible.

While CFPB has written agreements in place with the four federal 

financial regulators and with DOJ for interagency coordination related to 

oversight, these agreements do not provide for routine SCRA oversight 

for private loans connected with nonbank lenders and servicers. This may 

be because none of these agencies currently has the authority to 

routinely oversee SCRA compliance at nonbank private student loan

lenders and servicers. Because CFPB, the federal financial regulators, 

and DOJ each have a role in the oversight of either private student loans 

or the SCRA rate cap, any of these agencies could potentially be in a 

position to assume responsibility for the oversight of SCRA compliance by 

nonbank private student loan lenders and servicers. However, additional 

statutory changes may be required to give these, or any other agencies, 

additional authority to conduct routine oversight of SCRA compliance at 

nonbank private student loan lenders and servicers. CFPB and DOJ 

could communicate this need to the Congress.

In prior work, we developed a framework for crafting and assessing an 

effective financial regulatory system that stated such systems should be 

 6050 U.S.C. § 4041. This provision was added to SCRA in October 2010. See Veterans’ 

Benefits Act of 2010, Pub. L. No. 111-275, § 303(a), 124 Stat. 2864, 2877-78.
Page 33 GAO-17-4 Federal Student Loans

appropriately comprehensive, and cover all activities that pose risks to 

consumer protection, including closing any gaps in oversight.61 The lack 

of routine oversight of nonbank private student loan lenders and servicers 

related to SCRA compliance increases the risk that some 

servicemembers will not receive a benefit for which they are eligible, even 

though SCRA was designed to provide financial protection for all activeduty servicemembers.

The number of servicemembers receiving the SCRA interest rate cap for 

their federal and commercial FFEL student loans has greatly increased 

since student loan servicers began using an automatic eligibility check to 

identify those who are eligible. Nonetheless, some servicemembers 

continue to face challenges in obtaining the cap. They receive inaccurate 

SCRA information from DOD. In addition, if servicemembers have private 

student loans, their loan servicer is not required to use the automatic 

eligibility check to identify them. As a result, servicemembers are at risk of 

not always getting the rate cap benefit for which they are eligible. If DOJ 

were to update its proposed SCRA changes by requiring private loan 

servicers to use the automatic eligibility check to identify eligible 

borrowers, this could lead to legislative action that would provide 

consistent treatment for all eligible servicemembers regardless of type of 

student loan.

Education’s new borrower complaint system simplifies the complaint 

process for consumers, but lacks the ability to track SCRA complaints

systematically. Without a systematic way to track complaints about the 

rate cap, Education will not be certain whether servicemembers continue 

to experience problems, making it difficult for Education to meet its 

strategic goal of providing superior service. Oversight of compliance with 

SCRA is also dispersed across multiple agencies, each of which has 

limitations on its authority. Consequently, there is no routine oversight of 

SCRA compliance for nonbank private student loan lenders and 

servicers. The resulting lack of routine oversight for nonbank lenders and 

servicers increases the risk that SCRA violations for private student loans 

 61GAO, Financial Regulation: A Framework for Crafting and Assessing Proposals to 

Modernize The Outdated U.S. Financial Regulatory System, GAO-09-216 (Washington, 

D.C.: Jan. 8, 2009).

Conclusions
Page 34 GAO-17-4 Federal Student Loans

will go undetected and that some servicemembers may not benefit from 

the rate cap for which they are eligible.

1. To help ensure quality information is conveyed to servicemembers 

about how the Servicemembers Civil Relief Act (SCRA) interest rate 

cap applies to student loans, we recommend the Secretary of 

Defense direct the secretaries of each service branch, and work with 

other secretaries as appropriate, to ensure that all information about 

the SCRA interest rate cap for student loans is accurate when 

provided to servicemembers and to those who work with 

servicemembers to help them obtain SCRA benefits, including 

information contained in outreach materials.

2. To ensure that all eligible servicemembers with student loans receive 

the SCRA interest rate cap, we recommend the Attorney General 

direct the Department of Justice to consider modifying its proposed 

changes to SCRA to require use of the automatic eligibility check for 

private student loans.

3. To enhance customer service, we recommend the Secretary of 

Education direct the Office of Federal Student Aid to identify ways to 

modify the data collected in its unified borrower complaint system to 

allow the agency to more precisely identify and analyze complaints 

specifically about the SCRA interest rate cap.

4. To better ensure that servicemembers with private student loans 

benefit from the SCRA interest rate cap, we recommend that the 

Director of the Consumer Financial Protection Bureau and the 

Attorney General of the Department of Justice coordinate with each 

other, and with the four federal financial regulators, as appropriate, to 

determine the best way to ensure routine oversight of SCRA 

compliance for all nonbank private student loan lenders and servicers. 

If CFPB and DOJ determine that additional statutory authority is 

needed to facilitate such oversight, CFPB and DOJ should develop a 

legislative proposal for Congress. 

We provided a draft copy of this report to DOD, Education, CFPB, DOJ, 

and the four federal financial regulators for review and comment. We also 

provided relevant report sections to the federal student loan servicers and 

the private-sector company representing the 6 private lenders, for 

technical comments. DOD’s comments are reproduced in appendix III, 

Education’s in appendix IV, CFPB’s in appendix V, and DOJ’s are in 

appendix VI. Of the four federal financial regulators, the National Credit 

Union Administration provided formal comments, which are reproduced in 

Recommendations for 

Executive Action

Agency Comments 

and Our Evaluation
Page 35 GAO-17-4 Federal Student Loans

appendix VII, while the other three other regulators provided technical 

comments. We incorporated technical comments in the report as 

appropriate.

In its written comments, DOD disagreed with our recommendation, saying 

it was unnecessary because the department was already providing 

accurate information about the SCRA interest rate cap for student loans. 

DOD said that information provided in 6 of the 8 documents GAO 

reviewed is accurately based on statute whereas Education’s updated 

requirement to automatically apply the cap is based on policy which could 

change in the future. Moreover, the automated process applies only to 

federal and commercial FFEL student loans in contrast to other types of 

debt. DOD said that providing information based on statute rather than 

policy would cause less confusion and was a better approach than what 

we recommend. With regard to Education’s automated process, we note 

that Education formalized this approach through federal regulations that 

became effective as of July 2016, which currently legally requires

servicers to use this process for all federal and commercial FFEL loans. 

In addition, DOD said it was unable to verify whether DOD’s Military 

OneSource website still inaccurately states that the SCRA rate cap does 

not apply to commercial FFEL loans. However, when we searched the 

website using the term “SCRA,” we still found this inaccuracy as of 

October 26, 2016. DOD said it would look into a means of verifying 

website information, but in the meantime, it is satisfied that its training 

provides correct information. Given that Military OneSource is a key 

source of information for servicemembers and that, as we note in this

report, 2 of the 8 documents DOD provided state that the SCRA rate cap 

does not apply to student loans, we continue to believe that 

servicemembers are not always receiving accurate and up-to-date 

information about how the SCRA rate cap applies to student loans. 

In its written comments, Education said it is committed to accurately 

tracking the types of complaints it receives. While Education believes its 

new feedback system and monitoring efforts allow it to identify SCRArelated issues by conducting keyword searches using a variety of terms, 

the agency said that it will respond to GAO’s recommendation by creating 

a complaint subcategory specifically for SCRA under the “Military and 

Veterans Benefits” category. Education added that it had not previously 

created a specific complaint category for SCRA given that military 

members may be unfamiliar with the term. We share Education’s concern 

in ensuring complaints are captured regardless of whether the service 

member has knowledge of the SCRA term. However, as we point out in 

this report, one of the challenges with Education’s keyword search 
Page 36 GAO-17-4 Federal Student Loans

process is that it may miss relevant loan complaints where SCRA is not 

specifically mentioned. In implementing our recommendation by creating 

a subcategory for SCRA complaints, we encourage Education to use 

simple language to describe what an SCRA complaint is, rather than rely

on the servicemember’s knowledge of the acronym. We believe doing so 

would help servicemembers note concerns related to their student loan 

interest charges and active duty status, and allow Education to 

appropriately capture this information and resolve any issues.

In its written comments, CFPB did not specifically agree or disagree with 

our recommendation to provide oversight of SCRA compliance among 

nonbank private lenders and servicers, but acknowledged that it shares 

GAO’s interest in maximizing SCRA protections. CFPB said that while it 

will continue its strong collaboration with relevant federal agencies, 

existing interagency agreements could not be used to coordinate 

oversight of SCRA compliance because these agreements would not 

create the statutory authority CFPB would need to oversee SCRA. Based 

on CFPB’s comments, we modified the recommendation by removing the 

suggestion that oversight could be accomplished by updating interagency 

coordination agreements. Although CFPB does not currently have 

authority over nonbank lenders and servicers, the bureau said it has other 

tools at its disposal, including sharing information with other agencies 

about SCRA-related complaints or possible violations. We believe, 

however, that referring complaints does not take the place of regular 

oversight and that CFPB and DOJ can take additional steps toward that 

end. We therefore encourage both agencies to work together to 

determine the best way to ensure routine oversight of SCRA compliance 

for all nonbank private student loan lenders and servicers, and to 

consider developing a legislative proposal seeking additional statutory 

authority, as needed, should they determine that step to be necessary.

In its written comments, DOJ neither agreed nor disagreed with our 

second recommendation and agreed with our fourth recommendation. 

• With respect to requiring use of the automatic eligibility check for 

private student loans, DOJ said that its current package of proposed 

legislative changes provides benefits to servicemembers with all kinds 

of loans, including private student loans. Rather than requiring 

servicemembers to submit written notice and a copy of military orders, 

they need only give oral or written notice of eligibility for the cap to 

their creditors. However, as we stated in the report, servicemembers 

with private student loans would still need to be aware of the rate cap 

in order to give notice, whether written or oral. Therefore, we 
Page 37 GAO-17-4 Federal Student Loans

encourage DOJ to consider updating its current proposal to require 

use of the automatic eligibility check by all student loan lenders and 

servicers. Not only would this ensure that servicemembers with 

private student loans receive a benefit for which they are eligible, but 

also that the interest rate cap is applied consistently across all types 

of student loans.

• With respect to coordinating oversight with CFPB, and the four federal 

financial regulators, as appropriate, DOJ agreed with this 

recommendation and believes the agency is in full compliance; 

therefore they believe the recommendation should be closed. DOJ 

said the agency already coordinates extensively with CFPB and the 

financial regulators concerning SCRA compliance, through such 

mechanisms as referrals from CFPB for any SCRA-related violations 

and access to its consumer complaint database, and that it will 

continue to build upon them. While these mechanisms are 

commendable, we believe they do not constitute exercising routine 

oversight of nonbank private student loan lenders and servicers who 

are not affiliated with a depository institution. Therefore, we cannot 

close the recommendation as DOJ suggests. We believe that 

additional interagency coordination, including working with CFPB to 

seek additional statutory authority, as needed, is necessary to ensure 

routine SCRA compliance.

In its written comments on our fourth recommendation, the National 

Credit Union Administration (NCUA), one of the four federal financial 

regulators, agreed that additional interagency coordination around SCRA 

compliance for private student loans would be useful, especially for 

certain third-party service providers who may lend money for or service 

private student loans. NCUA noted that it does not currently have 

authority to provide routine oversight of SCRA compliance by these 

entities.

In its technical comments, the Federal Deposit Insurance Corporation 

proposed that GAO delete the fourth recommendation. In their view, 

oversight of nonbank private student loan lenders and servicers cannot 

be accomplished by updating existing interagency agreements since the 

agency lacks statutory authority to oversee these entities. As noted 

earlier, we modified the recommendation accordingly to address a similar 

comment received from CFPB. We underscore the need for CFPB and 

DOJ to work together to ensure the routine oversight of SCRA 

compliance for all nonbank student loan lenders and servicers, which they 

may determine requires them to seek additional statutory authority, to 
Page 38 GAO-17-4 Federal Student Loans

ensure that all eligible servicemembers receive the interest rate cap for 

their private student loans.

We are sending copies of this report to the appropriate congressional 

committees, the Secretary of Defense, Secretary of Education, Director of 

the Consumer Financial Protection Bureau, Attorney General of the 

United States, Chairman of the Federal Deposit Insurance Corporation, 

Chair of the Board of Governors of the Federal Reserve System, 

Chairman of the National Credit Union Administration, Comptroller of the 

Currency, and to other interested parties. In addition, the report will be 

available at no charge on GAO’s website at http://www.gao.gov.

If you or your staff have any questions about this report, please contact 

me at (617) 788-0534 or emreyarrasm@gao.gov. Contact points for our 

Offices of Congressional Relations and Public Affairs may be found on 

the last page of this report. GAO staff who made key contributions to this 

report are listed in appendix VIII.

Sincerely yours,

Melissa Emrey-Arras, Director

Education, Workforce, and Income Security Issues
Appendix I: Objectives, Scope, and 

Methodology

Page 39 GAO-17-4 Federal Student Loans

This report examines: (1) How many servicemembers have received the 

Servicemembers Civil Relief Act (SCRA) interest rate cap for their student 

loans? (2) what challenges do servicemembers face obtaining the cap? 

and (3) to what extent do federal agencies oversee implementation of the 

cap?

We used multiple methodologies to conduct this study. To obtain 

information on servicemembers receiving the SCRA cap, we used data 

from the 10 federal student loan servicers, the Department of Education 

(Education), and six private student lenders.1 To identify challenges 

servicemembers face obtaining the cap and assess the extent to which 

federal agencies oversee implementation of the rate cap, we interviewed 

officials and reviewed documentation from the Department of Defense 

(DOD), Education, the Consumer Financial Protection Bureau (CFPB), 

and the Department of Justice (DOJ). We also interviewed 

representatives of the 10 student loan servicers who are contracted by 

Education to service federal student loans, from four advocacy groups 

that represent servicemembers, and from one trade group representing 

servicers. In addition, we reviewed relevant federal laws and regulations. 

We used the above methodologies and a review of federal internal control 

standards and standards for assessing financial regulatory systems, as 

well as Education’s strategic objectives to determine whether the 

information provided to servicemembers about the SCRA rate cap is 

accurate, whether the challenges faced by servicemembers are different 

for those with private student loans, whether Education tracks SCRAspecific complaints, and whether there are any gaps in the oversight of 

the SCRA interest rate cap for student loans.

We conducted this audit from May 2015 through November 2016, in 

accordance with generally accepted government auditing standards. 

Those standards require that we plan and perform the audit to obtain 

 1

Aspire was an eleventh federal student loan servicer until September 2015. Because 

Aspire was still servicing federal loans when we began our review in May 2015, we 

included it in our interviews with the federal student loan servicers. However, Aspire was 

no longer servicing federal loans when we submitted our data request to the federal loan 

servicers in January 2016, so we did not include them in our record-level data request. 

Instead we received record-level data on the federal student loans that had been serviced 

by Aspire from the Missouri Higher Education Loan Authority, the loan servicer that took 

over Aspire’s federal loan portfolio. One of the other federal loan servicers stopped 

servicing such loans as of August 2016.

Appendix I: Objectives, Scope, and 

Methodology
Appendix I: Objectives, Scope, and 

Methodology

Page 40 GAO-17-4 Federal Student Loans

sufficient, appropriate evidence to provide a reasonable basis for our 

findings and conclusions based on our audit objectives. We believe that 

the evidence obtained provides a reasonable basis for our findings and 

conclusions based on our audit objectives.

To describe how many servicemembers received the SCRA interest rate 

cap on their student loans, we analyzed record-level data from the 10 

federal student loan servicers—the companies contracted to service 

loans owned by Education—on borrowers with federal loans or 

commercial Federal Family Education Loans (FFEL) for the period 

October 2008 (the beginning of the first full fiscal year that SCRA was 

applied to student loans owned by Education) through December 2015 

(the most recent available data).2 The 10 federal loan servicers as of 

December 31, 2015, were: Cornerstone, EdFinancial, Granite State, 

Great Lakes, Missouri Higher Education Loan Authority, Navient, Nelnet, 

Oklahoma Student Loan Authority Servicing, Pennsylvania Higher 

Education Assistance Agency/FedLoan, and the Vermont Student 

Assistance Corporation Federal Loans. Specifically, for borrowers who 

received the cap on at least one of their loans, we analyzed data provided 

by the 10 loan servicers to determine (1) whether the cap was applied on 

the basis of a written notification of eligibility from the servicemember or 

on the automatic eligibility check; (2) the type of loan (i.e., federal or 

commercial FFEL); (3) the duration of the cap; (4) loan interest rates prior 

to borrowers receiving the cap; and (5) loan disbursement amounts. We 

also used these analyses to examine how the SCRA interest rate cap

may affect total loan costs for servicemembers.

We also reviewed the interest rates for federal, commercial FFEL, and 

private student loans from 2008 to 2016, to make sure that interest rates 

 2

Federal loans include Direct Loans, which are made to students and families using 

federal funds and therefore owned by Education, and Education-owned Federal Family 

Education Loans (FFEL), which were made to students and families by private and state 

lenders and are owned and guaranteed by Education. Commercial FFEL loans are loans 

that were made to students and families by private and state lenders and guaranteed by 

Education. We requested that servicers identify unique loans in their record-level data 

using a servicer-specific account number. Because some loans were transferred between 

servicers during our review time frame, our numbers may include duplicate counts for 

borrowers who had the cap applied by more than one servicer. 

Analysis and Review of 

Data
Appendix I: Objectives, Scope, and 

Methodology

Page 41 GAO-17-4 Federal Student Loans

were over 6 percent for each type of loan during at least some of the 

period of time covered by our review (see tables 3 and 4).

Table 3: Selected Interest Rates by Loan Type, Federal Loans and Commercial 

Federal Family Education Loans (FFEL), 2008-2016

Loan type Loan disbursement date

Examples of 

interest rates and 

ranges

Federal loans

Subsidized Undergraduate July 2008-June 2016 3.4-6%

Subsidized Undergraduate July 2016-June 2017 3.8%

Unsubsidized Undergraduate July 2008-June 2013 6.8%

Unsubsidized Undergraduate July 2013-June 2016 3.9-4.7%

Unsubsidized Undergraduate July 2016-June 2017 3.8%

Subsidized Graduate July 2008-June 2013 6.8%

Unsubsidized Graduate July 2008-June 2013 6.8%

Unsubsidized Graduate July 2013-June 2016 5.4-6.2%

Unsubsidized Graduate July 2016-June 2017 5.3%

Commercial FFEL loans

Subsidized Undergraduate July 2008-June 2010 5.6-6%

Unsubsidized Undergraduate July 2008-June 2010 6.8%

Subsidized Graduate July 2008-June 2010 6.8%

Unsubsidized Graduate July 2008-June 2010 6.8%

Source: GAO analysis of Department of Education’s documentation of student loan interest rates. | GAO-17-4

Note: Subsidized loans are available based on financial need, while unsubsidized loans are available 

regardless of financial need. As of July 1, 2012, graduate and professional students were no longer 

eligible to receive subsidized loans. No new FFEL Program Loans have been made since July 1, 

2010.

Table 4: Selected Interest Rates for Private Student Loans, December 2011 

Examples of interest rates and ranges

Private loans As-of date Low end High end Average

Sample of variable rate loans December 2011 2.98-3.55% 9.5-19% 7.8%

Sample of fixed rate loans December 2011 3.4% 13.99% NA

Source: Consumer Financial Protection Bureau, Private Student Loans, Report to the Senate Committee on Banking, Housing, and Urban Affairs, the Senate Committee on Health, Education, Labor, and 

Pensions, the House of Representatives Committee on Financial Services, and the House of Representatives Committee on Education and the Workforce, (August 2012). | GAO-17-4

Note: Interest rates for private loans vary widely based on credit score, and variable rates may range 

from the low to the high end.
Appendix I: Objectives, Scope, and 

Methodology

Page 42 GAO-17-4 Federal Student Loans

We reviewed aggregate data from Education’s National Student Loan 

Data System on the number of borrowers with federal loans who were 

receiving the SCRA cap as of October 1, 2014, October 1, 2015, and 

December 31, 2015, and compared these data to the data we received 

from the 10 federal loan servicers. In addition, we reviewed aggregate 

data on the total number of federal and commercial FFEL loans open 

each year, from fiscal year 2009 through the first quarter of fiscal year 

2016, and the outstanding balance of commercial FFEL loans as of 

December 31, 2015 to describe the size of the commercial FFEL loan 

market.3 We also reviewed information provided by Education on loan 

transfer rates between servicers to determine the extent to which loan 

transfers occur. Because some loans were transferred between servicers 

during our review’s time frame, our numbers may include duplicate counts 

for borrowers who had the cap applied by more than one servicer. 

According to data from Education’s National Student Loan Data System, 

2 percent of federal loans were transferred in fiscal year 2009 and 5 

percent were transferred in fiscal year 2015. In addition, 12 percent of 

commercial FFEL loans were transferred between servicers in fiscal year 

2009 and 3 percent were transferred in fiscal year 2015.

With regard to private student loans, we reviewed aggregate data from 6 

private student lenders, who together accounted for 65 percent of 

outstanding private student loan debt as of March 31, 2016, via 

MeasureOne, a private-sector company representing the lenders. The 6 

lenders are: Citizens Bank, N.A.; Discover Bank; Navient; PNC Bank, 

N.A.; Sallie Mae Bank; and Wells Fargo Bank, N.A. Specifically, we 

reviewed aggregate data on the number of private student loans, 

borrowers, and outstanding loan balances serviced by these servicers 

overall, and for those receiving the SCRA cap, as of September 30, 2014, 

September 30, 2015, December 31, 2015, and March 31, 2016 (the most 

 3

This is important contextual information for commercial FFEL loans because overall, 21 

entities currently service commercial FFEL loans, including the 10 loan servicers that are 

also contracted by Education to service federal student loans. The number of federal and 

commercial FFEL loans made to borrowers shifted from October 2008 to December 2015. 

According to aggregate data from Education’s National Student Loan Data System, in 

fiscal year 2009, there were 28,503,683 federal loans and 48,893,421 commercial FFEL 

loans that had an outstanding balance at any point during the year and were serviced by 

the federal loan servicers or had been transferred to Education’s defaulted loan 

information system. In fiscal year 2015, there were 161,538,894 such federal loans and 

28,021,050 such commercial FFEL loans. No new FFEL loans have been made since 

Education’s authority to make or insure them was terminated as of July 1, 2010.
Appendix I: Objectives, Scope, and 

Methodology

Page 43 GAO-17-4 Federal Student Loans

recent available data). Because 2014 was when Education required that 

federal loan servicers use the automatic eligibility checks for federal 

student loans on a monthly basis, we collected data from the end of fiscal 

years 2014 and 2015, and for each quarter after the end of 2015, from the 

private loan servicers to see if the number of borrowers receiving the cap 

for private loans was also increasing over this period of time. We also 

asked these servicers whether they implemented the automatic eligibility 

check for the private loans they service over this time frame, and if so, 

when they first began using it and how often they use it to identify eligible 

servicemembers.

We determined that data from each of these sources were sufficiently 

reliable for the purposes of this report by electronically testing the data for 

missing data, outliers, and errors; by reviewing existing information about 

the data and the systems that produced them; and by interviewing 

knowledgeable loan servicer and Education officials, as appropriate. In 

the case of the private student loan data, we sent data reliability 

questions for the 6 lenders to MeasureOne, who forwarded them to the 

lenders. MeasureOne then collected the lenders’ written responses and 

forwarded them to us.

To learn how the 10 federal student loan servicers identify and work with 

eligible servicemembers to apply the interest rate cap and about any 

related challenges, we conducted semi-structured interviews between 

October 2015 and January 2016 with representatives of the federal 

student loan servicers who together serviced all federal student loans as 

of December 31, 2015.4 We also interviewed an official with the National 

Council of Higher Education Resources—one of four trade associations 

whose membership includes student loan servicing companies—about 

their attempt in 2011 to obtain permission from Education to use the 

SCRA website to obtain active-duty dates. This group also participates in 

 4

These 10 loan servicers also service commercial FFEL and private student loans, and 

our interviews with them included questions about their entire student loan portfolio. We 

also conducted an interview with representatives from Aspire, a loan servicer that was still 

servicing federal loans when we began our review in May 2015, but stopped servicing 

federal loans as of September 2015.

Interviews
Appendix I: Objectives, Scope, and 

Methodology

Page 44 GAO-17-4 Federal Student Loans

the Student Loan Ombudsman’s Caucus.5 To identify challenges 

servicemembers face obtaining the cap, we spoke with officials from 

DOD, Education, and CFPB, and with representatives of four advocacy 

groups that were selected to provide representation of both currently 

active servicemembers and veterans, and based on suggestions from 

agency officials and experts in this area: American Legion, Military 

Officers Association of America, Student Veterans of America, and 

Military.com. We also interviewed Education, CFPB, and DOJ officials to 

clarify the role of each agency with respect to overseeing implementation 

of the SCRA interest rate cap for student loans.

To determine how the federal loan servicers are supposed to be applying 

the cap for eligible borrowers and how Education, CFPB, and DOJ 

oversee implementation of the SCRA interest rate cap, we reviewed 

relevant federal laws and regulations, and policies, procedures, and 

guidance for the cap, as well as Education’s contracts with and 

monitoring plans for the federal student loan servicers. To learn about the 

challenges servicemembers face in obtaining the SCRA cap, we reviewed 

complaints submitted to CFPB by servicemembers and reports from 

CFPB that discuss such challenges. To identify possible challenges 

servicemembers encounter concerning the cap, we also reviewed 

relevant agency publications and websites, including materials used by 

DOD and Education to inform servicemembers about the cap. Finally, we 

reviewed documentation, such as memoranda of understanding, related 

to interagency coordination concerning the cap, including the Joint 

Statement of Principles on Student Loan Servicing issued jointly by 

Education, CFPB, and the Department of the Treasury in September 

2015.

 5

Student Loan Ombudsman Caucus, which is an informal coalition of individuals from 

Education, CFPB, and loan servicers who meet bi-monthly and share information about 

issues and questions related to student loans, promotes consistent loan servicing 

practices, provides feedback to Education on student aid legislation, and works to identify 

and analyze trends in student loans.

Review of Federal Laws, 

Regulations, and Other 

Relevant Documentation
Appendix II: Additional Data from Federal Loan 

Servicers and Private Lenders

Page 45 GAO-17-4 Federal Student Loans

Table 5: Number of Servicemembers with Federal Loans and Commercial Federal Family Education Loans (FFEL) Who 

Received the Servicemembers Civil Relief Act (SCRA) Interest Rate Cap for Each Month, by Identification Method, Selected 

Months from October 2008 to December 2015

Month

Federal loans Commercial FFEL loans

Received 

automatically via 

SCRA website

Received due to 

written notice of 

eligibility Total

Received 

automatically via 

SCRA website 

Received due to 

written notice of 

eligibility Total

October 2008 58 49 107 160 115 275

January 2009 250 181 431 609 433 1,042

April 2009 447 371 818 1,038 733 1,771

July 2009 779 659 1,438 1,700 1,121 2,821

October 2009 1,409 946 2,355 2,229 1,415 3,644

January 2010 2,315 1,469 3,784 2,807 1,659 4,466

April 2010 3,769 2,060 5,829 3,433 1,950 5,383

July 2010 5,358 2,796 8,154 4,166 2,361 6,527

October 2010 7,331 3,611 10,942 4,762 2,685 7,447

January 2011 9,292 4,473 13,765 5,333 3,016 8,349

April 2011 11,899 5,446 17,345 6,132 3,337 9,469

July 2011 14,616 6,489 21,105 6,796 3,722 10,518

October 2011 16,972 7,349 24,321 7,265 4,055 11,320

January 2012 19,656 8,214 27,870 7,771 4,258 12,029

April 2012 23,912 9,372 33,284 8,207 4,465 12,672

July 2012 28,902 10,878 39,780 8,758 4,739 13,497

October 2012 33,801 12,176 45,977 9,398 5,085 14,483

January 2013 39,059 13,597 52,656 9,730 5,473 15,203

April 2013 48,694 16,288 64,982 10,320 5,787 16,107

July 2013 58,804 19,088 77,892 11,580 6,180 17,760

October 2013 62,710 21,331 84,041 11,904 6,203 18,107

January 2014 67,645 21,805 89,450 11,914 6,194 18,108

April 2014 74,370 21,894 96,264 11,909 6,217 18,126

July 2014 82,126 21,204 103,330 12,118 6,199 18,317

October 2014 84,023 19,815 103,838 11,900 6,105 18,005

January 2015 85,851 19,170 105,021 11,875 6,100 17,975

April 2015 89,242 18,581 107,823 12,016 6,087 18,103

July 2015 93,298 17,967 111,265 12,282 5,989 18,271

October 2015 93,940 17,313 111,253 12,494 5,825 18,319

December 2015 91,699 17,011 108,710 11,822 5,740 17,562

Source: GAO analysis of record-level data from the 10 federal loan servicers as of December 31, 2015. | GAO-17-4

Appendix II: Additional Data from Federal 

Loan Servicers and Private Lenders
Appendix II: Additional Data from Federal Loan 

Servicers and Private Lenders

Page 46 GAO-17-4 Federal Student Loans

Note: These monthly counts are presented in figures 2 and 3 in this report and include 

servicemembers who received the cap for months going forward and also retroactively for months in 

which they were previously eligible. Because some loans were transferred between servicers during 

our review time frame, these counts may include duplicates if a borrower had the cap applied by more 

than one servicer. Federal loan servicers handled at least 77 percent of the outstanding loan balance 

of commercial FFEL loans as of Dec. 31, 2015. Data were not readily available on the remaining 

share of the commercial FFEL market.

Table 6: Selected Statistics of the Number of Months Servicemembers’ Federal 

Loans and Commercial Federal Family Education Loans (FFEL) Loans Had the 

SCRA Interest Rate Cap Applied, October 1, 2008 to December 31, 2015

Type of loan

Number of 

loans receiving 

the cap Mean

25th 

percentile

50th 

percentile 

(median)

75th 

percentile

Federal 475,276 21 6 16 33

Commercial 

FFEL

67,578 32 10 28 52

Total 542,854 22 6 17 34

Source: GAO analysis of record-level data from the 10 federal loan servicers as of December 31, 2015. | GAO-17-4

Note: Because some loans were transferred between servicers during our review time frame, these 

counts may include duplicates if a borrower had the cap applied by more than one servicer. Federal 

loan servicers handled at least 77 percent of the outstanding loan balance of commercial FFEL loans 

as of Dec. 31, 2015. Data were not readily available on the remaining share of the commercial FFEL 

market.

Table 7: Selected Statistics of Federal Loan and Commercial Federal Family 

Education Loan (FFEL) Interest Rates Prior to Having the SCRA Cap Applied, 

October 1, 2008 to December 31, 2015

Type of loan

Number of 

loans receiving 

the cap Mean

25th 

percentile

50th 

percentile 

(median)

75th 

percentile

Federal 475,276 6.738 6.8 6.8 6.8

Commercial 

FFEL

67,578 6.722 6.8 6.8 6.8

Total 542,854 6.736 6.8 6.8 6.8

Source: GAO analysis of record-level data from the 10 federal loan servicers as of December 31, 2015. | GAO-17-4

Note: Because some loans were transferred between servicers during our review time frame, these 

counts may include duplicates if a borrower had the cap applied by more than one servicer. Federal 

loan servicers handled at least 77 percent of the outstanding loan balance of commercial FFEL loans 

as of Dec. 31, 2015. Data were not readily available on the remaining share of the commercial FFEL 

market.
Appendix II: Additional Data from Federal Loan 

Servicers and Private Lenders

Page 47 GAO-17-4 Federal Student Loans

Table 8: Selected Statistics of Disbursement Amounts for Federal Loans and 

Commercial Federal Family Education Loans (FFEL) that Had the SCRA Rate Cap 

Applied, October 1, 2008 to December 31, 2015

Type of loan

Number of 

loans with the 

cap applied Mean

25th 

percentile

50th 

percentile 

(median)

75th 

percentile

Federal 475,276 $4,819 $2,000 $3,000 $5,500

Commercial 

FFEL

67,578 $4,807 $2,029 $3,500 $5,435

Total 542,854 $4,817 $2,000 $3,000 $5,500

Source: GAO analysis of record-level data from the 10 federal loan servicers as of December 31, 2015. | GAO-17-4

Note: Because some loans were transferred between servicers during our review time frame, these 

counts may include duplicates if a borrower had the cap applied by more than one servicer. Federal 

loan servicers handled at least 77 percent of the outstanding loan balance of commercial FFEL loans 

as of Dec. 31, 2015. Data were not readily available on the remaining share of the commercial FFEL 

market.

Table 9: Selected Statistics of Disbursement Amounts for Servicemembers with 

Federal Loans and Commercial Federal Family Education Loans (FFEL) Who 

Received the SCRA Rate Cap, October 1, 2008 to December 31, 2015

Type of loan

Number of 

servicemembers 

receiving the cap Mean

25th 

percentile

50th 

percentile 

(median)

75th 

percentile

Federal 171,894 $12,325 $3,000 $6,000 $12,100

Commercial 

FFEL

29,163 $10,322 $3,500 $6,625 $11,000

Total 201,057 $12,034 $3,000 $6,000 $12,000

Source: GAO analysis of record-level data from the 10 federal loan servicers as of December 31, 2015. | GAO-17-4

Note: Because some loans were transferred between servicers during our review time frame, these 

counts may include duplicates if a borrower had the cap applied by more than one servicer. Federal 

loan servicers handled at least 77 percent of the outstanding loan balance of commercial FFEL loans 

as of Dec. 31, 2015. Data were not readily available on the remaining share of the commercial FFEL 

market.
Appendix II: Additional Data from Federal Loan 

Servicers and Private Lenders

Page 48 GAO-17-4 Federal Student Loans

Table 10: Outcomes of Eligibility Determinations for the SCRA Rate Cap, Broken Out by Loan Type and Method for 

Determining Eligibility, October 2008 to December 2015

Type of loan

How eligibility 

was determined

Total 

number 

of loans

Loan had SCRA cap 

applied (interest rate 

adjusted to 6 percent 

or below)a

Eligible for SCRA 

cap, but interest 

rate already at or 

below 6 percent

Eligible for SCRA 

cap, but interest 

rate history 

incompleteb Deniedc

Federal SCRA website 

search

715,133

(100%)

360,553

(50%)

264,315

(37%)

30,622

(4%)

59,643

(8%)

Written notice of 

eligibility

383,130

(100%)

109,186

(29%)

69,192

(18%)

23,813

(6%)

180,939

(47%)

Total 1,098,263 469,739 333,507 54,435 240,582

Commercial 

Federal Family 

Education Loans 

(FFEL)

SCRA website

search

81,074

(100%)

44,488

(55%)

35,364

(44%)

602

(1%)

620

(1%)

Written notice of 

eligibility

45,683

(100%)

21,483

(47%)

12,560

(28%)

1,058

(2%)

10,582

(23%)

Total 126,757 65,971 47,924 1,660 11,202

Total 1,225,020 535,710 381,431 56,095 251,784

Source: GAO analysis of record-level data from the 10 federal loan servicers as of December 31, 2015. | GAO-17-4

Note: Row percentages may not add to 100 percent due to rounding. Because some loans were 

transferred between servicers during our review time frame, these counts may include duplicates if a 

borrower had the cap applied by more than one servicer. Federal loan servicers handled at least 77 

percent of the outstanding loan balance of commercial FFEL loans as of Dec. 31, 2015. Data were 

not readily available on the remaining share of the commercial FFEL market.

a

Because the counts in this column are based on the dates servicers determined servicemembers’ 

eligibility for the rate cap, and not on the dates the servicemembers actually received the cap, the 

counts differ from the counts of loans with the cap applied in tables 6 through 9 in this appendix.

b

While loans in this category were eligible for the SCRA interest rate cap, because some servicers 

had incomplete interest rate histories for some of their loans, we were not able to determine whether 

these loans had the cap applied or whether the loan’s interest rate was already at or below 6 percent.

c

Denials include instances when a servicemember’s qualifying military service was less than 30 days, 

had concluded by the time they took out student loans, or was still ongoing when the loan was 

disbursed. In addition, a servicer may deny the cap to a servicemember if their loan was paid off 

before August 14, 2008, the first day that the SCRA interest rate cap applied to federal and 

commercial FFEL loans.
Appendix II: Additional Data from Federal Loan 

Servicers and Private Lenders

Page 49 GAO-17-4 Federal Student Loans

Table 11: Number of Servicemembers with Private Student Loans Held by 6 Private 

Lenders Who Received the Servicemembers Civil Relief Act (SCRA) Interest Rate 

Cap, as of Selected Dates

Date

Number of 

servicemembers 

receiving the cap

Number of loans 

receiving the cap

Outstanding loan 

balance of loans 

receiving the cap 

September 30, 2014 14,970 30,090 $329,215,039

September 30, 2015 31,302 57,916 $600,769,825

December 31, 2015 32,838 60,711 $611,924,892

March 31, 2016 33,309 61,518 $619,386,743

Source: GAO review of aggregate data from six private lenders. | GAO-17-4

Note: These borrower counts could contain duplicates if a borrower had loans with more than one of 

the 6 lenders.
Appendix III: Comments from the Department 

of Defense

Page 50 GAO-17-4 Federal Student Loans

Appendix III: Comments from the 

Department of Defense
Appendix III: Comments from the Department 

of Defense

Page 51 GAO-17-4 Federal Student Loans
Appendix III: Comments from the Department 

of Defense

Page 52 GAO-17-4 Federal Student Loans
Appendix III: Comments from the Department 

of Defense

Page 53 GAO-17-4 Federal Student Loans
Appendix IV: Comments from the Department 

of Education

Page 54 GAO-17-4 Federal Student Loans

Appendix IV: Comments from the 

Department of Education
Appendix IV: Comments from the Department 

of Education

Page 55 GAO-17-4 Federal Student Loans
Appendix V: Comments from the Consumer Financial 

Protection Bureau

Page 56 GAO-17-4 Federal Student Loans

Appendix V: Comments from the Consumer 

Financial Protection Bureau
Appendix V: Comments from the Consumer Financial 

Protection Bureau

Page 57 GAO-17-4 Federal Student Loans
Appendix VI: Comments from the Department of Justice

Page 58 GAO-17-4 Federal Student Loans

Appendix VI: Comments from the 

Department of Justice
Appendix VI: Comments from the Department of Justice

Page 59 GAO-17-4 Federal Student Loans
Appendix VI: Comments from the Department of Justice

Page 60 GAO-17-4 Federal Student Loans
Appendix VII: Comments from the Prudential 

Financial Regulators

Page 61 GAO-17-4 Federal Student Loans

Appendix VII: Comments from the Prudential 

Financial Regulators
Appendix VII: Comments from the Prudential 

Financial Regulators

Page 62 GAO-17-4 Federal Student Loans
Appendix VIII: GAO Contact and Staff 

Acknowledgments

Page 63 GAO-17-4 Federal Student Loans

Melissa Emrey-Arras, (617) 788-0534 or emreyarrasm@gao.gov

In addition to the contact mentioned above, the following staff members 

made significant contributions to this report: Meeta Engle (Assistant 

Director), Jennifer McDonald (Analyst-in-Charge), Jeffrey G. Miller, and 

Jill Yost. Additional assistance was provided by Susan Aschoff, James 

Bennett, Mark Bird, Deborah Bland, Jessica Botsford, Brian Egger, 

Lawrence Evans, Brenda Farrell, Cody Goebel, Cynthia Grant, Kirsten 

Lauber, Sheila McCoy, John Mingus, Barbara Steel-Lowney, Michelle St. 

Pierre, Nicholas L. Weeks, Adam Wendel, and Rebecca Woiwode.

Appendix VIII: GAO Contact and Staff 

Acknowledgments

GAO Contact

Staff 

Acknowledgments
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