With over $1 trillion in debt, federal student loan debt now exceeds credit card debt and over $120 billion of that student loan debt is delinquent. A January 2014 report from the National Consumer Law Center (NCLC) called “ The Sallie Mae Saga: A Government-Created, Student Debt Fueled Profit Machine,” details the extensive role Sallie Mae plays in the student loan industry. Sallie Mae was created in 1972 as a government sponsored enterprise that could use public money to purchase student loans from banks. In 2004 Sallie Mae became a private company but its connection with the U.S. government has allowed it to become very rich. In 2013 it had a net profit of $1.4 billion. But not all of that wealth came legitimately. A Department of Education Inspector General Audit found that Sallie Mae received over $22 million in student loan subsidies between 2003 and 2006 that it should not have gotten. And Sallie Mae’s involvement in subprime private student loans with high origination and other fees also boosted its riches. According to the NCLC report, when the Obama Administration sought to switch to direct lending programs, Sallie Mae lobbied hard to keep the guaranteed student loan programs that were costing the government and students excessive amounts of money but benefiting private lenders. Although Sallie Mae lost that battle they still remain one of only four companies allowed to service the federal student loan programs.Sallie Mae also owns several of the debt management and student loan collection companies including General Revenue Corporation, Pioneer Credit Recovery and Arrow Financial Services.
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Sallie Mae’s extensive role in student loan financing is coming under more scrutiny. The Department of Education says Sallie Mae has incorrectly calculated income for the income based repayment program and committed servicing errors. The NCLC report also raises concern that Sallie Mae steers student loan borrowers into forbearance programs rather than other options even though forbearances can be costly to borrowers but easy for collectors. If you have student loan problems contact us to discuss what solutions might help provide relief.