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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Sallie Mae Mistakenly Reports Up to 1 Million Borrowers Delinquent

Student Loan Girl — Thu, 15 May 2008 00:42:00 GMT

As many as 1 million Sallie Mae customers may be experiencing problems with their credit scores after the student loan company erroneously reported some of its borrowers’ student loan accounts as delinquent.

Sallie Mae’s customers on graduated or extended repayment plans were unintentionally reported as borrowers who made only partial payments, which led Equifax, one of the three national credit reporting agencies, to label the accounts as past due.

Due to the mix-up, some borrowers found that their credit scores had dropped by 100 points or more, according to an article on Bankrate.com, (“Sallie Mae Error Causes Credit Score Plummet,” May 14, 2008).

A Sallie Mae spokesman said the error had affected less than 10 percent of its 10 million borrowers. The student loan company is working with Equifax to correct the problem and is supplying credit reference letters to any Sallie Mae customers who need help rectifying their credit score or help proving to a potential lender that Sallie Mae was responsible for the error.

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Student Loan Blog : Sallie Mae, student loan borrowers

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

Sallie Mae Mistakenly Reports Up to 1 Million Borrowers Delinquent