Weakening Economy Contributes to Sallie Mae’s $159 Million Quarterly Loss

Student Loan Girl — Tue, 28 Oct 2008 00:17:00 GMT

Student loan provider Sallie Mae reported a $159 million loss this quarter as the ongoing credit crisis continues to pose financial challenges for borrowers (“Sallie Mae Reports $159-Million Loss and More Delinquencies by Borrowers,” The Chronicle of Higher Education, Oct. 23, 2008).

Sallie Mae said that a rapid rise in delinquencies on private student loans this year has contributed to its losses. To account for these delinquencies, the student loan giant had to more than double the amount it reserves to cover the cost of these losses to $263 million from $102 million just a year ago.

To help stem further financial losses from borrowers with “higher-risk accounts,” Sallie Mae chief financial officer, John Remondi, said the company is taking a more aggressive approach in its debt collection efforts and is more closely analyzing customers who ask for a forbearance, which allows borrowers to temporarily reduce or postpone their student loan payments.

Borrowers requesting a forbearance will be more strictly scrutinized, Remondi said, to ensure that they are “one, committed to serving their debt, and two, have the actual ability to benefit from a forbearance.”

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Student Loan Blog : Sallie Mae, delinquent borrowers

Weakening Economy Contributes to Sallie Mae’s $159 Million Quarterly Loss