Last month, the Consumer Financial Protection Bureau (CFPB) launched an investigation into how Sallie Mae processes borrowers’ student loan payments. This latest probe into possible violations of consumer protection laws indicates that Washington is taking a harder look at Sallie Mae, the nation’s largest student loan company and the top recipient of Department of Education contracts.
The Federal Deposit Insurance Corp. and the Department of Justice have already begun to scrutinize the company for alleged misdeeds that include payment-processing issues, “unfair or deceptive” practices, discriminatory lending, and violations of the Servicemembers Civil Relief Act. Sallie Mae, which expects to pay penalties to the government and affected customers, said in its quarterly filing that it is “cooperating fully” with the government probes.
Rohit Chopra, the CFPB’s top student loan official, said earlier this month that the bureau found widespread problems in how student loan servicers process monthly payments from borrowers, such as misallocating payments and maximizing late fees and penalties. Chopra's report primarily focused on the $165 billion private student loan market but suggested that many of these problems may affect borrowers with $1 trillion in federal student loans. Earlier this year, Sen. Elizabeth Warren (D-Mass.) questioned the Education Department’s supervision of the companies it pays to collect payments on federal student loans, including Sallie Mae.