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Report: How Sallie Mae Became the Largest Student Loan Industry
*Report: How Sallie Mae Became the Largest Student Loan Industry Player at
Borrower and Taxpayer Expense*
*(BOSTON) *There are nearly 39 million borrowers in the U.S. carrying over
$1 trillion in federal student loan debt. About $120 billion of federal
student loan debt was delinquent in 2012a 30.5% increase from fiscal year
2011. This burden on borrowers has also created business opportunities for
servicers, collectors, and other private companies. A new report from the
National Consumer Law Center (NCLC) provides insight into the dangers of
the federal government relying on a for-profit publicly traded company to
protect borrowers and taxpayers and offers recommendations for reform. *The
Sallie Mae Saga: A Government-Created, Student Debt Fueled Profit Machine
* reviews the biggest player of all, with
connections to every aspect of the student loan industry.
In 1972, President Nixon created the Student Loan Marketing Association, or
he
government to use U.S. Treasury money to buy government-backed student
loans from banks. Sallie Mae benefited for more than 30 years from its
close government connections and became a fully private company in 2004,
growing into the dominant force in the student loan world. The business has
been extraordinarily profitable. Given a for-profit companys imperative
to do what is best for its investors, it is especially critical that the
government conduct rigorous oversight of its private contractors.
Unfortunately, the growing number of government investigations and consumer
complaints show that government supervision has been lax.
ensuring that companies like Sallie Mae continue to profit, said Deanne
Loonin, director of the National Consumer Law Centers Student Loan
Borrower Assistance Project and author of the report.
NCLCs analysis provides insight into the dangers of relying on a
for-profit publicly traded company to protect borrowers and taxpayers and
offers the following recommendations.
*Key Recommendations*
- *Federal and State Government Agencies Must Coordinate and Engage in
Rigorous Oversight and Enforcement*
- *Improve Evaluation of Servicers and Collectors * On the servicing
side, we recommend, at a minimum, measuring default prevention not
just on the numbers of borrowers avoiding default, but also on the ways in
which they avoided default. Also recommended: sending a sampling of
anonymous servicer files to neutral analysts to evaluate on a range of
criteria, including whether the borrower achieved an effective long-term
solution, if available.
- *Hold Servicers and Collectors Accountable for Poor Performance and
Legal Violations* The government should not reward servicers and
collectors with poor track records by continually renewing contracts, and
also act immediately to recover overpayments and penalties already
assessed. For example, the U.S. Department of Education has not yet
recovered over $20 million in allegedly improper payments to Sallie Mae
despite a 2009 recommendation to do so from the Inspector General.
- *Provide Relief for Financially Distressed Private Student Loan
Borrowers*
*Download the full report:* *http://tinyurl.com/q4n9dyx
*
This report builds on the body of work that NCLC has produced to assist
student loan borrowers. For more information, please visit
www.studentloanborrowerassistance.org
M. Erik Clark
[image: BCLogoSmall]
100 N. Barranca Avenue, Suite 250
West Covina, CA 91791
www.blclaw.com
Office: (626) 332-8600
Fax: (626) 332-8644
Board Certified in Consumer Bankruptcy
American Board of Certification
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