AFSCME 3357-HOF'S BLOG

Sallie Mae doesn't play well with others

Most folks know Sallie Mae as a government chartered, but publicly held student loan lender. Many people don't know that Sallie Mae also makes mortgage loans, issues credit cards, and has a debt collection subsidiary.

Sallie Mae gets favorable federal tax treatment, but it claims that it is exempt from most state laws protecting consumers. This article in the Portland Phoenix mentions 120,000 complaints about Sallie Mae. Here are a few highlights.

"Interviews with 22 consumer-finance attorneys, plaintiffs in lawsuits against Sallie Mae, consumer advocates, and higher-education experts show that Sallie Mae engages routinely in questionable business practices. Borrowers are charged excessive and undisclosed late fees. Aggressive collection tactics are employed against borrowers who have been unable to resolve billing disputes with Sallie Mae — which is, by industry standards, unresponsive to questions and complaints. And the company prevents many of its borrowers from consolidating loans with anyone else but Sallie Mae — which doesn’t always offer the lowest interest rates."


"The frequent use of such aggressive tactics, combined with the company’s relative unreceptiveness to borrowers’ complaints, has led many experts to wonder whether these methods, taken together, have become policy with the multi-billion-dollar lender. After all, the company stands to profit not only directly from these practices, but also by throwing students into default. That’s because borrowers of federally guaranteed student loans (issued through the Federal Family Education Loan Program, or FFELP) who have fallen on hard times can only under rare circumstances discharge student-loan debt if they file for bankruptcy. Usually, they must default, which not only carries harsher long-term penalties for borrowers than bankruptcy does, but guarantees lenders like Sallie Mae full compensation. Furthermore, Sallie Mae has recently gone into the debt-collection business, which means it can reap even more interest and fees of up to 20 percent of the balance from defaulted borrowers."


"SALLIE MAE may throw its weight around more confidently than most because it has cultivated friends in high places. A subplot in the presidential-election crisis of 2000 that went largely unnoticed, according to Salon’s Joe Conason, involved the use of corporate jets by the Bush-Cheney campaign to fly back and forth from Florida and who knows where else. Among those offering aviation services to the high cause? Enron, Halliburton, and, yes, Sallie Mae — a federally sponsored program. The State PIRGs’ Higher Education Project became so alarmed by the growing presence of student-loan-industry lobbyists in Washington that it issued a report in October 2002 titled "Lending a Hand: A Report on the Lobbying Expenditures and Political Contributions of the Five Largest Student Loan Corporations." The report found that Sallie Mae (which founded its first PAC in 1998), together with its next-largest competitor, Citigroup, spent $42.9 million in lobbying over the last three election cycles, accounting for almost 90 percent of lobbying funds spent by the top five student lenders. In fact, according to the report, Sallie Mae’s lobbying expenses "outpace even notorious special interest corporations"; the company spent more on lobbying in the 1998 and 2000 election cycles than RJ Reynolds Tobacco. Overall, the report concludes, "the student loan industry is making it a priority to increase its involvement in the political process," a trend that is "likely to continue as the ... 108th Congress begins the process of reauthorizing the Higher Education Act.""







Features | Sallie Mae not