December 29, 2007

Education Dept. Investigating Sallie Mae Billing Practices

Posted in Student Loan News at 7:27 AM by Joe From Boston


According to the Washington Post, Sallie Mae announced yesterday that it is being investigated by the Federal Education Department.  Read an excerpt from the article below:

Sallie Mae said yesterday that the Education Department is investigating its billing practices and that its business of issuing loans subsidized by the federal government will be significantly less profitable because of changes by Congress.

The disclosures were in a regulatory filing outlining the Reston student lender’s plans to raise $3 billion to satisfy an agreement requiring it to buy back its own stock at above-market prices. Sallie Mae shares closed
yesterday at their lowest price since 2001.

In its filing with the Securities and Exchange Commission, SLM Corp., as the company is officially known, also said it faces a federal lawsuit filed in Connecticut that seeks class-action status and alleges that Sallie Mae steered minority students toward more expensive loans. The company denied the charge in the filing.

The company has been on a roller coaster since the unraveling of a planned $25.3 billion buyout that would have given its stockholders $60 per share.

The collapse of Sallie Mae’s months-long effort to sell itself to a group of investors led by private-equity firm J.C. Flowers has left the company with a host of problems. Since the deal was announced early this year, Sallie Mae’s credit rating has deteriorated, and its borrowing costs have risen.  Meanwhile, its bread-and-butter business, issuing student loans subsidized by the federal government, has become less profitable.

In its SEC filing, Sallie Mae said that changes enacted this year in a federal student loan program “will
significantly reduce and, combined with higher financing costs, could possibly eliminate the profitability
of” issuing new loans through the program.

That statement struck a different note from arguments the company had made when it was fighting to
keep the buyout on track. The buyers argued that they were entitled to walk away from the deal because
the legislation cutting subsidies to lenders substantially changed the economics of Sallie Mae’s business.

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5 Comments »

  1. henry cadwalder said,

    Sally may has a serious corruption problem. They have a policy of getting payments, then unposting them after the computer shows they are paid. They change the details, assign a late charge and wait for 16 days to notify you. They will change some tiny part of your electronic payment to get your e-check to bounce so they can generate repeated late charges. I have the documented proof and would like to show this documentation to congress or a federal procicutor. They have systematically done this for 5 months with a loan that has not been late. You simply cannot stop them from doing this. I have spent a hundred hours trying to explain this to them and have found a system wide setup to keep this obsuerd theft policy running. These people belong in jail. I am ready to assist any prosicutor who may already be involved with similar violations of this foreign managed nightmare.

    • Henry – you should do exactly what you say you want to! Contact your state’s attorney general’s office and ask to meet with someone. Bring all your documentation with you. Also, report them to the Better Business Bureau!

  2. Wow, that’s scary – particularly as your bank has proof that Sallie Mae took your money. I’d be livid if it were me!

    If I were in your shoes, I would set up a meeting at the bank, and with a bank representative there with you, call Sallie Mae. If the first person you talk to won’t help. Demand to speak to a manager. Demand to get everything they say in writing from them, so you have documentation.

    If that doesn’t work, your could try contacting your Senators and Representatives in Congress. You could try a lawyer, as you have proof Sallie Mae took your money. You could also contact a local TV station – they tend to love doing Human Interest stories in these David vs. Goliath type genres.

  3. Kathryn Kerrins said,

    HELP ! I have been paying Sallie Mae for a student loan faithfully since 2001. For the last 3 years I have sent my payment electronically through my credit union. I have begun received notices from Sallie Mae that I have not paid on the loan since N0V 08. My bank has supplied tracking numbers, and receipts that Sallie Mae has received my payments. When I call customer service, they are hostile and give me no information other than I am in collections. Sallie Mae insisted that I send all my information via mail so that they can investigate?? I mailed this information (certified) received notice they have received it and again called to Sallie Mae- to be told they have no information. Where do I go from here, this is ruining my good credit rating. Reading the article regarding Sallie Mae’s practices I think there is something illegel going on

  4. […] admin wrote an interesting post today onHere’s a quick excerptMeanwhile, its bread-and-butter business, issuing student loans subsidized by the federal government, has become less profitable. … In its SEC filing, Sallie Mae said that changes enacted this year in a federal student loan program “ … […]


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