Sen. Elizabeth Warren (D-Mass.) has become the latest player in Washington to scrutinize student loan giant Sallie Mae. At least three federal agencies -- the Justice Department, Consumer Financial Protection Bureau, and Federal Deposit Insurance Corp. -- are investigating whether the company cheated active-duty military members and violated other borrowers’ consumer rights. And several states have united to examine how it handles borrowers whose loans it collects payment on and how it treats those who have defaulted.
Now, Warren has asked for detailed information on Sallie Mae's practices, including its customer-service scripts, a count of borrowers with federal student loans who have income-based repayment plans, and a tally of delinquent borrowers who have brought their loan payments up to date. In a letter to Sallie Mae CEO Jack Remondi, Warren said the request came out of concern that the firm may be harming borrowers and taxpayers by pushing debtors into repayment plans that increase their burdens and their risk of default.
In her letter to Remondi, Warren expressed concern that the company regularly puts distressed borrowers with federal student loans in plans that temporarily delay required payments. This eventually leads to higher payments and higher loan balances. Instead, critics believe Sallie Mae should help them enroll in federal programs that cap payments based on their incomes and offer the possibility of forgiving their debts. Government documents indicate that Sallie Mae enrolled relatively few borrowers into the Income-Based Repayment program and suggest that the company is putting borrowers in other types of repayment plans that may not represent their “best choice.”