Petition prompts SallieMae to change student loan rules
An online petition started by the website Change.org caused loan service SallieMae to change the conditions on college loan fees last week.
According to 23-year-old Stef Gray, an unemployed Hunter College graduate who was behind the petition, she’s only getting started.
“All I really want is for private student loans to have the same protections and safety nets that are given to federal loans,” Gray said in a phone interview.
Gray, whose parents died when she was younger, said that she took out four private loans through SallieMae “after federal funds and scholarship money dried up.”
Additionally, Gray said advertisements for SallieMae with pictures of students sitting serenely in the grass at her school often gave her a false sense of security about the corporation’s generosity and responsibility to its customers.
Instead, when Gray graduated, she was unable to find a job and found that SallieMae charged a forbearance fee, referred to as a “good faith deposit,” of $50 for each loan up to $150 for every three months the payment is deferred on the loan.
The deposit, Gray said, was much more like a fee, as the entirety of the payment went to SallieMae, not toward the loan, and it was not refundable upon resuming repayment.
Gray added that students with private loans could only defer payments with the $50 deposit for up to 24 months.
“So if you’re making loan payments over the course of 25-30 years, you can only be unemployed for a total of two years,” Gray said.
According to Patricia Christel, Sallie Mae spokeswoman, SallieMae had the $50 forbearance deposit in place to “emphasize the terms and long-term implications of their decision to use forbearance.” Christel said was the company policy for some time before they decided to make the change.
Christel added that 4 percent of SallieMae’s private education loans are currently in forbearance.
“The fact is that most student loan customers successfully manage their payments, particularly since those with a college degree continue to earn more and have higher employment rates than those without, especially in this economy,” Christel said. “Still, we recognize that a job search today may take longer than it used to, and we work with our customers to identify a solution that helps them navigate difficult financial circumstances and preserve their good credit standing.”
After Gray’s petition on Change.org garnered more than 110,000 signatures, SallieMae changed the conditions of the forbearance deposit.
Now, the $50 per loan deposit will be applied to the borrower’s loan when the borrower resumes normal payment, according to.
According to Gray, students who take out a federal loan through SallieMae or any other company, such as a Stafford loan, are protected if they cannot repay.
For example, federal loans allow student borrowers to pay loans back on a sliding scale based on income, so Gray, who has been unemployed, would have to pay nothing until she was able to find a job.
Additionally, Gray said that while federal student loans can be consolidated, combining two or more loans to lower monthly payments, private student borrowers at SallieMae are not given that option.
While Gray said that her credit card companies are willing to work with their customers. A credit counselor, for example, can help negotiate lower monthly payments and help the borrower create a debt payment plan. However, SallieMae actively discourages this practice.
“I worked full time throughout college,” Gray said. “It’s been pretty difficult for me, but it isn’t really about me, but the 110,000 people standing behind me” who were victims, or know victims of predatory lending, Gray said.
Caitlin Carroll can be reached at email@example.com.