Thursday, February 2, 2012

Why Was Sallie Mae Charging Borrower's $50 A Month For Loans In Forbearance?

Sallie Mae has been charging borrowers $50 a month to have their private loans placed in forbearance. But thanks to an online petition - started by Stef Graf - that denounced the charges, Sallie Mae is rethinking the fees. Reporter Candice Choi wrote, "The change came after an online petition asking the company to drop the fee collected more than 77,000 signatures on"

But here's the question: why were they charging a whopping $50 a month in the first place?

And that question leads to even more questions . . .
This list of questions could be endless, so let's stop with those four. Suffice to say, fifty bucks for your average American ain't pocket change. That's why this fee, which was being applied to people who were already struggling to make payments in the first place, makes no sense.

To be clear, the fee isn't being suspended. It is, however, going to be applied to the balance of the loan. How that works is confusing. Because Choi explains, "[Sallie Mae] will now apply the money toward the borrower's loan balance once on-time payments are resumed for six months in a row." So, wait, if the loan is in forbearance, then the $50 they are charging won't apply? The charges will only apply once they begin paying and keep it up for 6 months? Again, how is this fair, and why are they allowed to do this?

Since this piece is laced with so many questions, here are a few more:
  • Why is Sallie Mae, which used to be a GSE (government sponsored entity), still using that name, Sallie Mae? It's no longer a GSE. It's a private company - it severed ties from the government entirely in 2004.  
  • Isn't that name misleading? So many borrowers took out loans with Sallie Mae - perhaps parents who had loans with the company still think it's part of the government. That seems a wee-bit misleading, right?
If the U.S. government hadn't given birth to Sallie Mae, this predatory, no-good company would have gone belly-up years ago. (Mind you, I am not a libertarian or a person who thinks government is the source of all evil - nope, didn't drink the Reaganite coolaid). But, seriously, this company is despised by customers (just do a search on tweets about Sallie Mae). It has been sued time and time again. And just recently, Sallie Mae decided to sue Sallie Mae! So why is it still in business?

All right, enough with the questions.

Sallie Mae has been visiting AEM a lot over these past few days, and that includes several visits from HQ. Who knows who is behind these Internet searches - could just be folks in their call centers who are in debt or sick of working for a dreadful loan shark.

But perhaps the loans sharks, who seem woefully out of touch, will consider the questions above. At least an activist can only hope, right?

Image Credit: "erin is eclectic"


Anonymous said...

I always wondered if there is a nexus betwen Sallie mae and GC Services, the Collection Agency.

Or is it ever possible to see into the private labaryinth of Corporate America, let alone the Student Lending Industry?

Anonymous said...

The $50 fee is for their private loans, and they refuse to consolidate these loans, so if you have more than one you have to pay $50 for each of them, capping at $150. I work 36 hours a week as a barista and can barely afford to eat because of these bloodsuckers. Good thing I got a degree in social I can make coffee for people and live in poverty.

Cryn Johannsen said...

@Anonymous 9:22 PM - okay, so we're always referred to as "customers" when it comes to higher education. Let me ask you as question: if we are customers, why can't we return our diplomas for a refund if they aren't benefiting us. What do you think?

Anonymous said...

Well, I think education should just be free to begin with. Returning the loans for a refund doesn't really get to the root of the problem, and it would never happen anyway. What we need is a revolution, not reform. Capitalism is clearly failing to provide for the majority. It's time to get rid of it altogether.

Cryn Johannsen said...

@Anonymous 10:48 PM - Oh, rest assured, I absolutely agree. We have lost a very important idea or truth: higher education is a PUBLIC GOOD. I have argued with other advocates about why higher ed should not be part of the market system, and they were at a loss. (Incidentally, the same goes with health care and prisons - these things should NEVER be part of the market).

I am speaking about the way in which analysts, higher ed folks, etc. talk about a degree. They always quantify it according to market standards. I think this line of thinking is not only wrong, but is dangerous. We only need to look around and see why it's so wrong.