Student loans may soon be a thing of the past for PSECU, the $4.2 billion Harrisburg, Pa., credit union founded in 1933 to serve Pennsylvania state employees.
According to President/CEO Greg Smith, the decision to discontinue student loans has nothing to do with problems generated by Sallie Mae, which services loans for about 1,000 credit unions.
“We’ve referred several hundred of our members to Sallie Mae for loan servicing over the past year,” said Smith. “I haven’t heard any complaints from the borrowers, and believe me they would have let us know.”
Also Read: CFPB Says Sallie Mae Service Sags
PSECU members who have signed on with the former government agency, now one of the country’s four major nonbank student loan servicers, may be in the minority if recent press reports are true.
The Newark, Del., firm, also known as the SLM Corp. and the nation’s largest servicer of student loans, has attracted the unwanted attention of lawmakers in recent years for a variety of alleged transgressions. It ranked last in a recent CFPB analysis in terms of servicer satisfaction.
Sallie Mae takes exception to the analysis and complaints that it does a poor job servicing its 25 million student loan customers. In fact, Sallie Mae has ranked first in cumulative loan default protection since 2009 as measured by the U.S. Department of Education, according to Patricia Christel, Sallie Mae’s vice president of corporate communications.
“Our number one priority is to assist our customers and ensure their success, and our customers' track record is indicative of our efforts,” said Christel, who says the firm works with an estimated 1,000 credit unions. “We take great care in providing service to our credit union partners’ customers, and their approval rates and successful repayment trends are both very strong.”
Calls to the U.S. Department of Education to verify Christel’s claims were not immediately returned, due to the government shutdown.
Sallie Mae’s private education loans are designed to supplement federal grants and personal savings as a way to pay the increasingly high costs of a college education, Christel said.
The private education loan offers families careful underwriting, in-school payments to help students graduate with less debt, and on-time payment rewards. It is a popular alternative among credit unions, she adds.
Currently, 92% of the 40-year-old firm’s private education loan customers make on-time payments and defaults have fallen to just 2.7%, the lowest levels since prior to the recession, Christel said.
During the past academic year, Sallie Mae said, it 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.
“Sallie Mae’s private education loan referral program can be a good choice for credit unions that want to offer an education loan to their members and their families, but prefer not to deal with underwriting, funding and servicing the loan,” Christel said.