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Sallie Mae Claims Borrowers' Thank-You Notes Exceed Complaints

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Sallie Mae, the nation's largest student loan company whose business practices are under investigation by at least three federal agencies, has told lawmakers and federal officials that it receives three times as many thank-you notes from borrowers in default than verbal complaints.

The company's self-reported figures contrast with other publicly available information that suggest the company is among the worst when it comes to the borrower experience.

"The fox also claimed that the chicken was quite satisfied," said Barmak Nassirian, director of federal relations and policy analysis for the American Association of State Colleges and Universities.

Sallie Mae's assertion, detailed in a Jan. 16 letter addressed to Education Secretary Arne Duncan that was obtained by The Huffington Post, was part of a series of claims Jack Remondi, Sallie Mae's chief executive, presented in a defense of his company's practices in response to mounting criticism of its treatment of borrowers. Even though Sallie Mae enjoys the Education Department's support, Remondi told Duncan he wanted to respond to some of the attacks.

Congressional Democrats, including Sen. Elizabeth Warren (D-Mass.), have targeted the company's alleged law-breaking and violation of Education Department rules. Student groups have urged the Department of Education to suspend its contract with Sallie Mae. Policymakers outside the Education Department are examining the company's failure to enroll many of its distressed borrowers into one of the Obama administration's signature student debt-relief initiatives. And Sallie Mae's investors are fleeing the company as it faces increasing compliance costs and government scrutiny.

Sallie Mae representatives did not respond to a request for comment. Dorie Nolt, an Education Department spokeswoman, said the agency had received Remondi's letter and was reviewing it.

In his letter, Remondi declined to address the various criticisms that have been levied against the company in recent months. But he noted that within the past year, the company had seen a "substantial increase in demand" for the federal government's two main debt-relief initiatives, known as Income Based Repayment and Pay As You Earn. Both plans cap borrowers' monthly payments relative to their incomes.

In September, HuffPost detailed Sallie Mae's failure to enroll borrowers into Income Based Repayment. At the time, federal policymakers took note, prompting the company to publicly declare after publication of the article that it "actively educate[s] our customers about IBR, and anyone eligible who applies receives it."

Remondi also took issue with an Education Department inspector general report that criticized the department for failing to track verbal complaints by borrowers whose federal student loans were in default.

He said the company last year "tracked and reported" on average 11 verbal complaints a month. By contrast, he said, a company unit that deals with federal student loan borrowers in default received on average "33 thank-you notes and written compliments per month for the compassion, understanding, and guidance of our employees who helped student loan borrowers resolve their default."

"One recent borrower wrote, 'I want to thank you for your patience when helping me rehab my loan ... I was nervous about calling since I had defaulted on the loan, but you gave me hope,'" Remondi said.

The Education Department does not make public the number of complaints it receives per student loan servicer, a source of frustration to borrower advocates and policymakers outside the department. Over the last four years, borrowers have registered more than 132,000 complaints with the Education Department.

But other public figures suggest that Sallie Mae's self-reported figures of complaints and praise may not represent the average borrower's experience with the company.

Sallie Mae ranks last among the Education Department's four main servicers of student debt, according to the department's separate surveys of borrowers, schools and federal employees.

The company was responsible for half of all complaints lodged by private student loan borrowers with the federal consumer bureau during the fiscal year that ended in September. The next closest company was responsible for 11 percent of all borrower complaints.

And Sallie Mae is the lowest-rated company for student loans according to a ranking compiled by ConsumerAffairs, a self-described consumer news and advocacy organization. On a 1-5 scale measuring consumer satisfaction, with five stars being the highest ranking, 92 percent of reviewers gave Sallie Mae just one star.

Deanne Loonin, a borrower advocate who recently wrote a critical report on Sallie Mae, said the company's claim of 11 complaints a month was "not believable."

"We hear more about Sallie Mae than other companies," Loonin said, citing her experience representing borrowers who have fallen behind on their debts.

Chris Hicks, an organizer at Jobs With Justice’s Debt-Free Future Campaign, who helped organize a December letter to Duncan criticizing Sallie Mae, said the company's tally of complaints seemed "very low."

"If you follow their Twitter account, they do help people who publicly ask for help," Hicks said, in reference to the numerous but unverified daily Tweets complaining about the company. "But good service shouldn't require someone to go on Twitter to complain. It's what every customer should be entitled to."

This month, blogs highlighted the case of Olivia Katbi, the sister of law school student Andrew Katbi, who died with unpaid Sallie Mae loans. Olivia Katbi took to social media to highlight what she described as "soulless" treatment from Sallie Mae that verged on "borderline harassment" to collect the debt from her mother, who had co-signed some of Andrew's loans. Shortly after Olivia Katbi began tweeting about her family's case, the two sides reached a settlement, she said on Twitter.

Katbi's case is among a series of headaches plaguing the company.

Last month, the Education Department said that it had declined to levy any fines on the student loan giant despite several confidential determinations over the past decade that allege the company had harmed borrowers and incorrectly billed the department, among other student debt-related failures. The disclosure prompted outrage among student groups.

Sallie Mae recently told investors it expects to spend $70 million to deal with several government probes into its business practices, prompting a sell-off that has dragged the company's shares down 15 percent since it reported quarterly earnings on Jan. 16. The Standard & Poor's 500 Index is down just 4 percent during the same period.

The company faces a pending enforcement action by the Federal Deposit Insurance Corp. for allegedly violating borrowers' rights. The Department of Justice has been probing the company's treatment of active-duty members of the military and the Consumer Financial Protection Bureau is investigating how the company processes borrowers' monthly payments.

A coalition of student organizations, teachers, universities and borrower advocates, including the Debt-Free Future Campaign, last month called on Duncan to prohibit Sallie Mae from collecting payments on federal student loans until the company complies with government rules. The group also recommended the Education Department immediately launch a probe of Sallie Mae’s servicing and debt collection practices and then publish the results.

The National Consumer Law Center’s Student Loan Borrower Assistance Project this month published a report by Loonin in which it referred to the company as a "student debt fueled profit machine" and highlighted "the dangers of relying on a for-profit publicly traded company to protect borrowers and taxpayers."

Loonin said it's likely that Sallie Mae's count of complaints is under-reported. She said the company either isn't being truthful, or borrowers are unable to get through the company's maze of customer service representatives in order to lodge a formal complaint.

The Education Department's definition of what constitutes a complaint may also be behind the low figures, Hicks added. He said the department narrowly defines verbal complaints to exclude many types of borrower criticisms.

"We need more information. We have so little to go by," Loonin said of the Education Department, echoing recent complaints by federal policymakers and industry executives.

Nassirian, who represents state colleges and universities, said the reason is probably much simpler.

"If you're going to make up numbers, it's sort of like North Korean elections -- just come up with bigger numbers. It makes them more credible."

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