The bad policies and practices of Sallie Mae Loan Forgiveness continue to live down to the public’s already low opinion. It now appears that despite holding almost 40 percent of the debt owed by students through the Federal Family Education Loan Program (FFELP); Sallie Mae has only 15 percent of its borrowers enrolled into the Income Based Repayment Program. That 15 percent means that out of over 900,000 students, only about 140,000 are enrolled in the program designed to help and protect them. This all while defaulted student loans are at a record 30% of all borrowers. It’s a wide disparity that many government officials and student advocates point to as a reason why the student loan system needs an actual overhaul and not just another band-aid legislation that does very little for the people who actually need relief.
As we pointed out last time, the roots of this problem go back for years. This time however, we’ll focus on what happened last year and why it doesn’t look good for current and future students. In 2012, Sallie Mae Loan Forgiveness offered up a $225 million debt package to investors. If you don’t recall hearing about this, it may be because the offer was made using Sallie Mae’s formal name of SLM Corporation. This is what the folks at Sallie Mae prefer to be called now and they went to great lengths to keep their original name out of anything having to do with the new offering.
Earlier this year, President Obama touted the Income Based Repayment Program as the primary tool to help students get out from under the threat of defaulting and to begin shrinking the amount of student debt. When he pointed out that this debt not only holds back graduates, but the economy itself, it may have been the most bipartisan comment he has made in four and a half years as President. Graduates and their families enrolled in Income Based Repayment have their monthly payments capped in direct relation to their income and provides for full forgiveness of their remaining loan amounts once they meet a minimum number of monthly payments. Neither of these benefits put a single dollar into Sallie Mae Loan Forgiveness pockets except for a smaller amount of interest payments compared to the original loan or especially when those loans go into default.
Sallie Mae, of course, denies any wrongdoing or manipulation of student loan holders. Any report or news story that points out their low enrollment numbers is dismissed as “misguided”. However, the number of eligible students compared to those enrolled cannot be as easily pushed aside. When pushed for clarification or at least more accurate data, Sallie Mae Loan Forgiveness has gone completely silent except for an occasional, generic press release that promises to do something. The National Consumer Law Center continues to ask for more information, but has so far received nothing from Sallie Mae and little more than that from the Department of Education.
Even without directly answering questions, the Department of Education has made some decisions that point to Sallie Mae’s misdeeds. The department recently announced that it would reduce the number of federal loans the company would be allowed to provide in 2014. This new number of loans now makes Sallie Mae Loan Forgiveness the smallest of the Department of Education’s four major lenders.