Sallie Mae Needs To Do More to Educate Borrowers on Repayment Options
Sallie Mae, the nation's largest servicer of federal student loans, is failing to enroll many of its distressed borrowers into income-driven repayment plans, critics say. According to documents obtained by The Huffington Post, "Sallie Mae, a.k.a. SLM Corp., has enrolled relatively few borrowers into the Income-Based Repayment program. Sallie Mae dominates the now-discontinued Federal Family Education Loan Program, owning between 37 and 40 percent of the outstanding FFELP debt held by the private sector. But its share of FFELP borrowers who are enrolled in IBR is about half that, or 15 to 18 percent."
“It is concerning that Sallie Mae has such a disproportionately low number of borrowers utilizing the Income-Based Repayment program,” said Persis Yu, a staff attorney at the National Consumer Law Center. “Unfortunately, we do not have a lot of data about Sallie Mae or other servicers' performance.”
It’s unclear why Sallie Mae is failing to enroll so many of its struggling borrowers into IBR. One possible reason could be the fact that income-contingent monthly payments under IBR could bite into the company’s profits or hurt holders of FFELP loans that Sallie Mae has securitized and sold to investors.
“Borrowers should have a right to expect that their federal loan servicer will work with them to get the best option available. This highlights the need for more information about servicers that are supposed to be helping out federal student loan borrowers,” said Yu, the National Consumer Law Center lawyer.
Flexible student loan repayment options and forgiveness provisions are available for borrowers of federal student loans, but they can be tricky to navigate and the details matter. To learn more about Income-Based Repayment, "Pay As You Earn," and other income-driven repayment options, visit our tools page.
To learn more about Sallie Mae's poor performance in educating its federal student loan borrowers on their repayment options, read the article by Shahien Nasiripour and Joy Resmovits in The Huffington Post here.
