Sallie Mae Predatory Lending Prevention and Financial Aid Abuse

Sallie Mae's predatory lending practices have left many students and families in financial ruin. Sallie Mae's high interest rates and fees can lead to debt spirals that are impossible to escape.

One example of Sallie Mae's predatory lending is their practice of charging interest on interest, which can cause debt to balloon out of control. This can result in debtors owing up to 10 times the original amount borrowed.

Sallie Mae's aggressive marketing tactics often target vulnerable students and families who may not fully understand the terms of their loans. This can lead to financial decisions that are detrimental to their long-term financial health.

Sallie Mae's financial aid abuse includes charging students for unnecessary services such as insurance and counseling.

Beware of calls that create a sense of urgency, claiming student debt relief or forgiveness is only available for a limited time.

Scammers will try to convince you to pay a large upfront fee to qualify for debt relief or forgiveness.

They might ask for your Federal Student Aid information, including your FSA ID or password, to change your contact information and prevent your servicer from reaching out to you.

Some scammers promise to wipe out your debt immediately if you pay the fee, which is not only false but also illegal.

Be cautious if they ask you to sign a power of attorney or third-party authorization, as this can lead to severe financial and credit damages.

Here are some common red flags to watch out for:

The CFPB has taken action against companies that prey on student loan borrowers, often with devastating consequences.

In one notable case, the FTC filed a lawsuit against Student Debt Doctor LLC and its owner, Gary B. White, Jr., for committing fraud and engaging in deceptive practices.

The company tricked student loan borrowers into thinking they could get immediate relief from their monthly payments and get their remaining balances forgiven in exchange for an upfront fee.

Borrowers were also led to believe their loans would be put in forbearance, but this didn't happen, resulting in financial losses and increased student loan balances.

Damage to credit scores was another consequence of the company's actions, as borrowers fell behind on payments.

The FTC ultimately sent over $2 million to more than 22,800 defrauded borrowers in June 2022.

If you're struggling with your student loan payments, know you have options. You can apply for an income-driven repayment plan, which adjusts your payments based on your income and family size if you have federal student loans.

Refinancing private student loans can also lower your monthly bill two ways: either by reducing how much you pay on interest or by extending your repayment term. However, excellent credit and a stable source of income are usually required for this.

You can also ask your lender about forbearance and deferment options for both private and federal student loans, which temporarily pause payments for a few months at a time.

Here are some resources to help with loan servicing abuse:

If you're dealing with a predatory lender, there are steps you can take to protect yourself. File a complaint with the FTC online or by calling 877-382-4357. You can also file a complaint with your state attorney general.

You can also contact your student loan servicer, as they often have processes in place to deal with these situations. Don't forget to change your FSA ID and password if you've given it to someone, and notify your bank about the issue so they can stop any unauthorized payments.

If you're having trouble with a loan servicer, you can work with the Federal Student Aid Ombudsman Group to resolve disputes. This independent office is a last resort, so try to work with your federal lender first.

If you have a private loan and need help, you can file a complaint with the Consumer Financial Protection Bureau (CFPB). They've handled over one million disputes since 2011, with 97% of consumers receiving timely responses.

Here are the steps to submit a complaint to the CFPB:

If you're struggling with your student loan payments, know you have options. Applying for an income-driven repayment plan can adjust your payments based on your income and family size, which can be a huge relief.

Refinancing private student loans can lower your monthly bill by reducing interest or extending your repayment term. However, excellent credit and a stable source of income are usually required.

Forbearance and deferment options can temporarily pause payments for a few months at a time, giving you some flexibility until you get back on your feet. Your lender can tell you more about these options for both private and federal student loans.

Some lenders are willing to work with you even if you have less-than-stellar credit, making refinancing a possibility.

If you're dealing with loan servicing abuse, there are resources available to help. The Consumer Financial Protection Bureau outlines examples of harassment that are considered illegal under the Fair Debt Collection Practices Act.

You can start by understanding what constitutes harassment. The Consumer Financial Protection Bureau provides examples of illegal actions, such as repeated phone calls or threats to sue.

For student debt loan relief, the Federal Trade Commission offers a comprehensive section on its website that explains loan repayment, forgiveness, consolidation, and loan scams. This information can help you navigate the complex process of managing your student debt.

If you're considering loan cancellation, the U.S. Department of Education provides standards to review. This will help you determine if you qualify for cancellation of your loan.

Here are some key resources to keep in mind:

In 2017, the Federal Trade Commission launched an initiative called "Operation Game of Loans" to crack down on student loan debt relief scams, which had collected over $95 million in illegal fees.

Over the last three years, the Consumer Financial Protection Bureau has received over 31,000 complaints regarding student loan servicing.

Sixty-eight percent of the complaints received by the CFPB relate solely to federal student loans.

The top two issues reported by student loan borrowers are inaccurate loan information and payment mishandling, accounting for 25 and 21 percent of all complaints, respectively.

Here are some key statistics on student loan servicing complaints:

Navient, one of the largest student loan services in the country, settled a landmark case in January 2022 for engaging in predatory lending practices, agreeing to pay $95 million to 350,000 federal student loan borrowers.

Over 31,000 complaints regarding student loan servicing have been received by the Consumer Financial Protection Bureau (CFPB) over the last three years.

The majority of these complaints, 68%, relate solely to federal student loans. This is a staggering number, and it highlights the need for better student loan servicing.

Inaccurate loan information and payment mishandling are the top two issues reported by student loan borrowers, accounting for 25 and 21% of all complaints, respectively.

Here are some specific examples of companies that have been involved in predatory lending practices:

As a result of these settlements, borrowers have received significant compensation. For example, Navient will have to pay $95 million to 350,000 federal student loan borrowers, in addition to canceling roughly $1.7 billion in private loans for some 66,000 borrowers.

For-profit schools have a history of exploiting students and profiting from their debt. Many for-profit schools needed private loans to meet the 90-10 rule, which requires 10% of their revenue to come from non-federal sources.

Private student lending skyrocketed in the 2000s, with the market for securitized student loans jumping 76% in 2006 to $16.6 billion. This growth was largely driven by predatory lenders creating products designed to satisfy investors and schools, not borrowers.

For-profit schools worked with private lenders to make loans to students, knowing the bad outcomes that awaited them. In some cases, schools and lenders entered into recourse agreements, where the school agreed to cover losses resulting from defaulted loans.

The lenders got away with these practices because they weren't on the hook if students couldn't pay.

Repetitive and harassing phone calls are a common issue with loan servicers. Navient has been accused of initiating "robocalls" without consent, which is a clear example of unfair practice.

Loan servicers are not allowed to use threatening or profane language, yet some have been known to do so. This behavior is unacceptable and can cause significant stress for borrowers.

Providing public lists of people who haven't paid their debts is also a violation of federal privacy protection statutes. This can have serious consequences for individuals who are already struggling to manage their debt.

Here are some examples of unfair practices committed by loan servicers:

Loan servicers who hide information about the terms of the loan or the repayment process are operating in a grey, unethical area. This lack of transparency can lead to borrowers making uninformed decisions that ultimately harm their financial situation.

Improper management of payments is another unfair practice that can occur. Loan servicers may inaccurately allocate funds, purposefully mishandle them, or cause students to incur late fees even if they paid on time.

Unprofessional customer service is a common complaint among borrowers. This can include making it impossible to get through to a human representative, allowing exceedingly long wait times, or even purposefully hanging up on a borrower.