Mailbag: Getting the Runaround from Sallie Mae

As the student loan industry mobilizes to battle the Obama administration over the President’s plan to eliminate the Federal Family Education Loan (FFEL) program, we are starting to hear a lot from lenders about the superior customer service that the bank-based program allegedly provides. “Direct Loans are simply not subject to the same quality of service,” Marcia Sullivan, director of government relations at the Consumer Bankers Association, recently told The New York Times.

Are these claims true? We really can’t say since there haven’t been any empirical studies comparing the level of customer service offered by the two federal student loan programs. But we are skeptical about the quality of service private lenders are providing, because of comments we have received over the past two years from federal and private student loan borrowers who have complained about their dealings with Sallie Mae, the nation’s largest student loan company.

Given the heated battle that is just getting started on Capitol Hill, we thought we’d share some of these comments with you.

We have heard, for instance, from many borrowers who complained that they could not get straight answers from Sallie Mae customer service representatives about how much they owed. One such comment came from a father who had co-signed his son’s private loans:

When my son’s loans were coming due, he called to find out about payment schedules, and a payment book, which never arrived. He finally got a notice that he was past due in payments. He talked to several people at Sallie Mae, and got several different amounts that were due. Finally got someone to state that they would send out payment coupons, which they did. He made the first payment, and then, his own fault, forgot about mailing the next payment until 2 days before due. He called Sallie Mae, and they had a totally different amount that was due, other than was on the payment coupon, and told him that he was late with his payments….. Not the case, we have canceled checks to prove otherwise. I called them, spent 3 hours on the phone, talked to about 5 different people, and got about 5 different amounts that were due… then I got the song and dance that if I paid them $377 on that day, everything would be caught up…. so I made the payment… never got a corrected payment booklet, or coupon, so we called again to make phone payment, and got ANOTHER DIFFERENT amount that was due… I cannot understand why they cannot give us a clear amount of payment that is due, and why it changes with each person that we talk to. (Scammed, February 6, 2009)

Others also complained of being asked to pay fees for services that were not rendered:

This past summer I knew I was about to have a lot of financial difficulties. I was 8 months pregnant, did not have a job because I had just moved into a new area…and well no one wants to hire someone who is clearly pregnant (sad but true). Anyway, I knew that I was not going to be able to make payments much longer on my private loans until at least after my child was born and when I was employed again.

So I called to speak with someone over the phone to make sure that there wasn’t something they could do to help me. I was told by the rep that if I paid $100 ($50 for each private loan – I had two) that I would be able to put my loans in forbearance. I actually advised the representative at that time that my online account showed that I was ineligible for forbearance. The representative assured me that this was not the case and if I paid this fee I would not owe another payment until December 27th, 2008. I even asked her several times to make sure we were on the same page that I would not owe anything until late December. She agreed with me each time.

Anyway, I went ahead and paid their fee and thought this would take care of my problem until December. I figured this would give me enough time to sort through some things and hopefully be able to start paying them again.

Well the next month rolls around and it shows that I still owe a payment. I called and asked why my loans were not put into forbearance when I had paid their $100 fee to do so. The representative told me that the payment only brought me current on my account and my loans WERE NOT put into forbearance like they had told me they would. Then she instructed me to pay ANOTHER $100 to put them into the so-called forbearance that I am pretty sure would have not happened for a second time. I kept explaining to them that I had already paid this fee and I would NOT be paying it again but it was like they could not understand that concept at all. (Private Loan Forbearance, January 12, 2009)

Another commenter, who was having trouble making payments on her loans because she was suffering from a debilitating illness, wrote in about “the runaround” she experienced trying to get the company to work out an affordable repayment plan:

I contacted Sallie Mae every step of the way and always got the runaround or a different story from them every time I called. They lost records of my communications. They would promise one thing and then renege. My $24K loan suddenly was hit with late payment fees and penalties almost equal to the amount of the original principle…With every plea for help, and always with the promise of paying back, I was met with a door slammed in my face. (Another Response to Ex-Loan Huckster, October 31, 2008)

Others accused the company of taking actions specifically to drive up the cost of their loans. One borrower, who had taken out a total of $130,000 in federal and private loans to attend the Savannah College of Art and Design, wrote:

I know that borrowing that money comes to be my fault to some extent — but what isn’t my fault are the company policies and procedures of Sallie Mae. They have lost NUMEROUS payments of mine, and they have tacked on $1,000s in mysterious processing fees of which I can not get an answer from their “reps” as to what they are. (Not Full Sail but SCAD, March 2, 2009)

Others simply questioned the company’s competence:

I do not have federal loans through Sallie Mae. I have only private loans through Sallie Mae. I pay about $400 on these loans monthly, which is more than the minimum amount required…

But yesterday I received a phone call from Sallie Mae saying I am late on my federal loan payment. Again, I have no federal loan with them. Yet they seem to think I have a $10K federal loan at 7.22% variable interest rate in addition to my private loans. NOTE: This interest rate would be above my interest rate on my private student loans.

I completed graduate school in 2003. I have not been back to school and I have no plans to go back to school. I have been paying my private Sallie Mae loans at a rate that will have them paid off ahead of (Sallie Mae’s) schedule.

This is absolutely lunacy, especially when Sallie Mae touts its “borrower benefits”; its customer service and cries poverty to Congress at every opportunity. (I do not have federal loans, June 15, 2008)

Now this is obviously not a scientific survey. And we’re not saying that customer service in the Direct Loan program is perfect. But when we have received as many complaints as we have about the predominant student loan company in the country, we’ve got to wonder whether touting the loan industry’ s customer service capabilities is really going to fly.

As always, we appreciate the comments we have received on this topic and others. Please keep them coming.