Sallie Mae Sags in Service Scoring: CFPB
When it comes to servicing student loans, Sallie Mae trails its competitors, which could be bad news for the estimated 500 credit unions that participate in the former government agency’s Smart Option Student Loan referral program.
An analysis by the Consumer Financial Protection Bureau, based on Department of Education survey data, used participant satisfaction data from the department’s Direct Loan program to create its ranking system.
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Categories measured included loan defaults, both by dollar volume and number of loans, and overall satisfaction with the program. The findings ranked the now private Sallie Mae at the bottom of the list of four providers.
CFPB staff analyzed quarterly performance reports over the past year in five areas from non-bank servicers FedLoan Servicing , or the Pennsylvania Higher Education Assistance Agency; Great Lakes Higher Education Corp. & Affiliates; Nelnet and Sallie Mae, or the SLM Corp. The results, based on grading on a curve, appeared last week in a blog by Rohit Chopra, CFPB’s student loan ombudsman.
Sallie Mae ranked worst in borrower, school and federal personnel satisfaction, and second when it came to managing loan default by dollar volume and number of loans. Unfortunately, borrowers who don’t like their servicers have little to no option when it comes to changing, Chopra wrote.
Loan servicing contracts are awarded to participating services with the best performance scores. Based on grades given for 2012 performance, Nelnet likely will be awarded the highest allocation of new servicing volume, while Sallie Mae will receive the lowest number, according to Chopra.
The analysis comes on the heels of several federal probes of the student loan corporation, including a investigation by Sen. Sherrod Brown (D-Ohio) over Sallie Mae’s failure to assist troubled borrowers, and Sen. Elizabeth Warren (D-Mass.) over failure by both the Department of Education and the Department of Treasury to investigate incidences of alleged wrongdoing by the loan servicer.
The 40-year-old Sallie Mae is the nation’s top student loan servicer, currently serving 25 million customers, according to the company’s website. During the past academic year, Sallie Mae helped 2.1 million past-due customers return their education loan accounts to good standing, preventing $41 billion in federal and private education loan defaults, the company said.