Sallie Mae apparently trying to avoid Income Based Repayment

[debtprison]

Just a heads up. I recently contacted Sallie Mae regarding my loans and spoke to a CSR. I wanted to go over my options. I brought up Income Based Repayment which basically would mean I pay ZERO per month to them under my current income and if I go 25 years under the plan the debt is eliminated. The CSR tried to insinuate that I was not eligible -- although without directly saying this. The CSR was trying to get me to make a few full payments first before being eligible.

My understanding is that I was eligible and if one clearly can show their income demonstrating this and are not in default it should almost be automatic.

WATCH OUT WHEN TALKING TO SALLIE MAE! Know your options and don't trust them to tell you them all.

Here's info on Income Based Repayment:

http://studentaid.ed.gov/PORTALSWebApp/students/english/IBRPlan.jsp

Note: It's not the same as Income Contingent Plan. IBR is usally far better for low income borrowers.

[debtprison]

Apparently this is happening to others as well:

http://www.facebook.com/topic.php?uid=18274939375&topic=14345&post=82036

Predatory Lending is illegal. -Truth in Lending Act. This afternoon my law partner contacted Sallie Mae in regards to her application for Income Based Repayment. The Representative lied to her repeatedly, telling her she did not qualify for Income Based Repayment. My partner called me while she was still talking to a Sallie Mae Representative and I did the computation (On Sallie Mae's own website) for qualification, which clearly showed she did qualify for IBR. Only after repeatedly asking for IBR did the representative finally say she would "go to the back office", and then came back a few minutes later to say that in fact my partner did qualify for IBR. They also made many other repayment offers in between the denials of qualification for IBR. The full implication being that the Sallie Mae representative wanted to get my partner to agree to anything except IBR. This is the type of behavior used car salesmen use, not representatives of one of the largest US corporations, that is now being funded almost entirely by the US government.

This also fits with my experience. My monthly income is about $800 with a family size of 1 as defined by the guidelines. Clearly I qualify. But what happened was the CSR stated she had to check with her supervisor. She then came back and told me that I would have to satisfy the terms first by making some payments! I told her this was impossible given my current income unless they are okay with $10.

I didn't fight it because I didn't care. I took a financial Hardship Deferment instead because I wanted to get that in place to prevent any chance of default. (I was 60 days past due)

Anyway my experience matches the experience the person from Facebook had. They don't seem to want to put people in IBR without a fight even when it is a very clear cut case like mine!

How many people Default because of this?

[KeithDoxen]

The student loan industry is the next financial bubble about to burst. The problem is that the cost of higher education is inflated beyond the value of the degrees received. So students graduate and are immediately "underwater," just as if they had purchased a home and immediately found their home to be worth less than their mortgage. The only way to stop this is to heavily regulate the student loan industry. That probably includes being more selective about giving out student loans in the first place. There's no reason for anyone to lend or to borrow 100,000 dollars for a degree that is only worth a 35,000 a year job on the market. Plus if student loans are harder to come by then college will become cheaper too.

[Fresh]

debtprison,

There are so many people that have had problems with Sallie Mae for their federal loans in particular. When I was trying to get a deferment, I was basically re-routed to one person after the next over a period of months. I read a series of stories for people who had had the same experience. To get the deferment I needed, I had to find the correct form. They would never send the correct one even though I asked multiple times.

Every person was given blatantly incorrect information. I honestly felt they were deceived so they would go into default. With the Income Based Repayment plan, I think the fed Ombudsman is receiving daily complaints about Sallie Mae. It's very frightening because during this horrid economy, this is the time when people need the correct information to make a good decision.

Thanks for this post.

Fresh

[bigtim6656]

No in fact it would make our country stupid as no one could afford to go to school. The problem is people go to school for something that will have them working at burger king because there is no jobs for their degree. Right now I am 1 1/2 years into a 2 year degree followed by another 2 years for my BA. RIght now I have 18k in loans for 4 semesters including summers. Which is low for around here. When I get done I figure I will be have about 40k in loans. I think the problem is college are there to make money and not educate people, but look at public schools not like their any better.

So how do you be selective, Do you look at credit, raise the income requirements increase grants, or do you just say sorry kid you can not go to school for that because you wont get rich enough to pay back loans.

The student loan industry is the next financial bubble about to burst. The problem is that the cost of higher education is inflated beyond the value of the degrees received. So students graduate and are immediately "underwater," just as if they had purchased a home and immediately found their home to be worth less than their mortgage. The only way to stop this is to heavily regulate the student loan industry. That probably includes being more selective about giving out student loans in the first place. There's no reason for anyone to lend or to borrow 100,000 dollars for a degree that is only worth a 35,000 a year job on the market. Plus if student loans are harder to come by then college will become cheaper too.

[KeithDoxen]

So how do you be selective, Do you look at credit, raise the income requirements increase grants, or do you just say sorry kid you can not go to school for that because you wont get rich enough to pay back loans.

We've put a great deal of inflationary pressure on education because of these student loans. An easy economic example would go something like this. Let's say you give everyone in the country 10,000 dollars to go to college. What's to stop colleges from simply increasing their tuition by 10,000 dollars? And then we're right back to where we started, only we have the same product at a greater cost, meaning that we're getting less value out of it. It's the same principle that prevents us from making everyone millionaires by just printing a million dollars for everyone. All you would do is devalue the currency.

Right now, we have federal student loans, which essentially do what I describe above by promising X amount of money to all who qualify, and we have private student loans, which give students money based on credit, which is a really silly way to make student loan decisions, as most college kids haven't even begun to build a credit history. What I would do is scrap the private lenders, have the federal government handle the loans, and then make rational decisions as to who should be lent to based on prospective ability to repay. So a 4.0 student who wants to go to Harvard Law should probably get six figures in student loans. He'll probably be ok. A 3.0 student who wants to major in Art History at a snazzy private college that costs 35k a year in tuition alone...well, I would say he should be denied. But that will work out for him as well, because he will either rethink his major, or choose a cheaper school, or both, which is a better decision for both the student and the lender.

The big victims here would be overpriced private schools, and schools that market their liberal arts programs to students who are basically using college as a four year vacation before they start working. My plan would force the private schools to bring down their tuition, and would incentivize students to make better life decisions regarding their careers. The average 3.5 GPA student who wants to go to a state school and study accounting or whatever probably wouldn't see anything change. He would still get his loans because he is now and would be then a good risk.