What You Must Know About Sallie Mae Loan Forgiveness

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If you’re wondering if Sallie Mae Loan forgiveness exists, you should first understand a little more about the lender. Sallie Mae® is a name that is ubiquitous within the student loan industry, and rightfully so.

Beginning with a head start as a government organization that converted to a private organization, Sallie Mae® (SLM) and now Navient dominate the private student loan market.

Long before they split into two companies, SLM was the subject of many regulatory lawsuits. It did not take Navient too long to also fall under scrutiny and become the subject of multiple state and federal regulatory actions which are still ongoing.

Chances are, if your private student loans were originated by SLM, they are now more than likely serviced and held by Navient – but there are exceptions to every rule and trend, and lenders try new strategies on a fairly regular basis.

What Forgiveness Options Do Sallie Mae Loan Company offer?

SLM offer two in-school repayment options. These include 1) fixed repayment and 2) interest repayment (where you cover the accrued interest each month).

But like so many, it can be a real struggle trying to keep up with your loan repayment plan because your overall cost also increases with interest (and variable rates). Monthly loan payments don’t seem to scratch the surface of your current balance.

Loans for students.

It’s no wonder so many people contact me to ask about alternative student loan repayment options as a way to hack Sallie Mae Loan, looking to explore all possible avenues including loan forgiveness programs. Unfortunately, private borrowers don’t have the same flexibility as their federal counterparts.

Sallie Mae® is a private lender and as such does not offer any traditional “forgiveness programs” for private student Sallie Mae loan borrowers, except for very rare cases such as the Career Education Corp fallout which, unlike other for-profit college regulatory lawsuits, dealt primarily with private loans.

In that ruling, it was Career Education Corp itself that is responsible for the forgiveness payments of the private loan borrowers took out. Sallie Mae, and it’s sister company Navient do sometimes offer settlements under certain conditions.

However, borrowers attempting to settle on their own often run into issues with aggressive debt collectors, not knowing what stage of the collection cycle to maximize the savings of a settlement while minimizing risk; and making common mistakes like opening up with the offer that you want to settle for or disclosing too much about personal finances. 

You might also want to consider student loan refinancing which can help you save a significant about of money. However you do need to pay very close attention to the rates.

Variable rate loan rates, range from around 2% to 8% APR and fixed rate loan rates, 3% to 8% APR, depending on which company you go with and your credit score, income, and whether or not you have a cosigner.

SLM also offer a rate reduction program and forbearance program. Give me a call on 937-503-4680 if you’d like to find out more about what I would recommend for your situation.

Sallie Mae spins off to form Navient

In 2014, Sallie Mae® “spun off” or split into two companies. Navient would handle most of the servicing for federal student loans and origination plus servicing for private ones, while SLM themselves became an FDIC insured bank (and thus the end of SLM federal student loans as a government-backed guarantor).

However, not all were transferred to Navient – SLM still retains some, and originates many new private loans on their own.

In my opinion, a big reason for SLM splitting into two companies was to re-brand and get past some of the baggage that they were associated with.

Students enjoying themselves at college.

Unfortunately for them, it didn’t take long for their new subsidiary/spin-off Navient (read more about Navient student loan forgiveness here) to develop a negative reputation of their own, as both a consistently negatively ranked federal student loan servicer; and a private lender with few options whose loans appear to never go down for many borrowers, despite on-time and even additional payments.

This was not the typical kind of partnership between two student loan companies – the easiest way to describe it as that SLM split into two separate companies – sort of like cell mutation.

The CEO for Sallie Mae® previously was Jack Remondi. Guess who the CEO for Navient is now? That’s right – Jack Remondi.

So this was not the typical type of merger between two separate companies. I have also talked to reps at SLM who used to work for Navient, and vice versa.

The two companies are very closely related and there is somewhat of a revolving door between them; but despite that they follow two very different tracks when it comes to settlement negotiation and how they handle defaulted accounts. 

Similar businesses – drastically different collection procedures

I can typically negotiate good Navient settlements soon after charge-off (default). SLM used to do some settlements with their internal Recovery department (similar to Navient, and they may still do this), but recently I have noticed a different track that almost resembles the type of strategy that a lender like the National Collegiate Trust would take.

Debt buyers can become involved on SLM accounts

On a 2018 SLM settlement, the loan was sold to a debt buyer – which other than NCT, and to a lesser extent Discover and Citi, is extremely uncommon in the private industry (Navient never does this for example).

We’re now seeing this happen much more often, with SLM loans being sold shortly after default to debt buyers like EOS/US Asset Management, and LCS Financial. 

According to a SLM presentation to investors, they expected to sell $3 billion in private student loans to debt buyers in 2020, and they plan to continue to sell $3 billion each year after.

In my personal experience, I’ve seen this trend increase greatly in the last several years, and unlike prior to 2018, I’ve only negotiated one settlement with Sallie Mae’s Recovery department – the rest were all sold to debt buyers.

We are not seeing the same kind of “paper trail” issues that have dogged the owners of NCT and gotten cases dismissed in court – this is a onetime sale, not repeated sales and repackaging like NCT accounts, and Sallie Mae® is licensed as an FDIC insured bank now – so there are more rules and regulations they have to follow. 

Student dealing with lenders

To give you an idea of how this plays out – it can get complicated. On the settlement I mentioned above, once it was sold, the debt buyer then assigned the account to a collection agency staffed by some rude and unprofessional agents whose clear strategy was to hardball me for months (nearly a year).

During this time I was working with both the debt buyer and the collection agency, and communicating with a manager at the debt buyer’s company – the multiple points of attack strategy. 

The debt buyer recalled most of the loans back to their office after some time, once they realized the collection agencies hardball tactics won’t work with me.

Once the debt buyer for SLM recalled the majority of the loans, I was able to negotiate a sub 50% settlement with them – not as good as what we would get with Navient, but still very good (I consider any settlement at 50%-55% or less to be a good settlement). 

Previously I was able to negotiate 40-50%% settlements with SLM internal recovery, but despite dragging negotiations out for months and throwing every tactic I have at them, the debt buyers don’t seem to go much below 48-50% of the balance.

I’m assuming that there is a firm “basement” amount that they cannot go past and still turn a profit on the loans they’ve bought from SLM. 

Conclusion: The closest option to Sallie Mae loan forgiveness is a settlement

To conclude – a settlement is the closest thing that exists for Sallie Mae® loan forgiveness for the vast majority of borrowers.

We can expect to see more SLM student loans being sold upon default in the future, and as negotiations have progressed, I’ve been able to build negotiating relationships with representatives and managers at these different debt buyers; which helps us get the lowest settlements possible. 

I enjoy difficult situations where I have to put my full 10 years of negotiating experience into play to solve complex problems while dealing with unexpected variables issues with my clients or with the lender (which sometimes pop up).

I’m creative, adaptive, and flexible. Call my office today at 937-503-4680 to schedule an evaluation, or better yet, fill out my evaluation form here.

More on the history of Sallie Mae, loan forgiveness, and borrowing

Sallie Mae was implemented by President Nixon in 1972, and was then named, the Student Loan Marketing Association. According to a policy brief piece written by Scott Piazza and Victor Nava (Project Director Anthony Randazzo), “The Nixon administration’s stated aim in creating Sallie Mae was to catalyze private investment in student loans by converting relatively illiquid loans into bonds backed with an explicit guarantee from the United States Government.”

Essentially, Sallie Mae made it increasingly possible for private investors to become involved in the student lending process, by increasing the liquidity of student loans. It also meant that because of the ability of Sallie Mae to garner monies from the Federal Financing Bank, they were able to cash in on lower rates and better terms, as compared to entities considered a non-government sponsored enterprise or ‘non-GSE.’

According to this same source, because of these purported benefits, Sallie Mae was able to rise in the ranks of student lenders rapidly. In fact, it is said that by 1991, they provided more than 1/4 of student loans guaranteed by the federal government. The very next competitor in line, Citibank, only constituted 4-percent.

SOURCE: https://reason.org/wp-content/uploads/files/sallie_mae_cronyism.pdf


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About Andrew Weber, NACCC Certified Student Loan Counselor

Andrew Weber is a NACCC Certified Credit Counselor and a NACCC Certified Student Loan Counselor. He is the only certified student loan Counselor who specializes exclusively on private student loan issues in the US. He's helped hundreds of borrowers drastically reduce their debts.