For all of my rants and frustrations against FedLoan Servicing, I must admit that while their practices may be annoying and not in your best interest – they have never done anything illegal. Another loan provider that is consistently rated the worst has recently been caught doing just that, and is now forced to pay the penalty. Could you have guessed which loan provider that was before you read the title? If you were thinking Sallie Mae, you would have guessed correctly. Sallie Mae has recently been ordered to pay around $96M in penalties and reimbursement for overcharging troops on loans.
Let that sink in for a bit, they were charging service members that could have very well been putting their life on the line more than they should have! Borrowers were denied their benefit requests and some were stuck with $500 or more of extra interest. Over 60,000 service members could be affected by this and there is up to $96M up for grabs pending the resolution of the court cases.
The one thing that Sallie Mae is allowed to do is neither admit or deny wrongdoing, which is kind of lame. I know it’s standard in most of these cases but when they are allowed to say it’s “processing errors” but still have to pay this fine, the punishment seems kind of weak. It basically comes down to these just being the cost of doing business that it set aside ahead of time. If you can make $200M practicing sketchy behavior and only have to pay $90M in fines, isn’t that simple math that you come out ahead? Obviously we have to figure in integrity and honesty in this case but for a lot of these companies that seems to be severely lacking.
These service members will now be contacted by an independent contractor to see if they are eligible to be reimbursed, but I’m not sure how well that will work. These people were probably given the run around to begin with because of being out of the country, on a base, and having limited time. We all know how terrible it is to try to resolve an issue on the phone after working all day, can you imagine if that work was active duty military? Some people will probably get missed and then have to jump through hoops once again.
Sallie Mae just recently had it’s government contracts renewed by the Obama administration, even under criticism of Elizabeth Warren (her name seems to come up a lot with student loans, I’m not familiar with her other policies and leanings but she seems to be fighting for student borrowers which I agree with). Sallie Mae is currently under other active investigations and probes, yet their contract was still renewed! The government basically decided to renew all the lenders contracts, no matter how bad the service, as not to displace student loans. When you have to constantly investigate and even fine the company in this case it seems like it might start to be wiser to not renew that contract instead.
Another thing that stinks about this story is that Sallie Mae and even other loan companies could be doing the same exact to everyday people like you and me. The fact that they took advantage of soldiers is what gave this so much traction and is what led to an investigation. Who’s to say they aren’t getting away with these sort of things with other demographics that just aren’t as public? Obviously it could also be the opposite that are doing everything correctly, but their track record is not in their favor at this point.
All I have to say is, shame on you Sallie Mae! I hope that I never have to read another article like this from Sallie Mae or any other student loan provider.