The total amount of student loans of Americans breaks records: what could it threaten

While borrowers are struggling to pay their payments on time, Sallie Mae has sent over 100 sales managers to Hawaii. The occasion is the celebration of the sale of loans for 5 billion dollars.

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Sallie Mae brought over 100 employees to Hawaii in August to celebrate a record year of 5 billions in student loans from 374 000 borrowers.

Ray Quinlan, Sallie Mae's chief executive, said the trip was not a sales executive's incentive. “Maui is a pretty good place. Employees could go there for a few days on their own or take their family with them,” he said.

“This is a commercial meeting for all our sellers,” said Ray Quinlan, adding that the company has been organizing such trips since its founding in 1970. Then she served federal loans for education.

Since then, lenders have changed, and now the company offers private loans. But in 2014, it was divided into two parts: Sallie Mae Bank, which offers private loans, and Navient, a newly created branch, it serves and collects loans, including those sold to Sallie Mae.

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However, Sallie Mae borrowers said the company did not treat them as well as the sales department.

39-year-old Paige McDaniel 20 years ago took a federal student loan at Sallie Mae to pay for her bachelor's degree. Six years later, before Sallie Mae split up, she took a private loan to pay for graduate school.

“I thought it was the same loans,” said McDaniel from a suburb of Denver. As a mother of two, she borrowed $ 120 000 for further education.

The agreement stated that before signing it, the document should be carefully read. It stated that the interest rate was variable. But the woman does not remember being told that the private loan rate was much higher.

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Following the signing, Sallie Mae announced that McDaniel would pay “over 1500 dollars a month.”

“I told them I couldn’t afford it and tried to negotiate payment. But they said, 'Sorry, we're going to foreclose on your house and garnish your paycheck if you don't make payments,'" McDaniel explains.

Now she owes $ 304 000, although she filed for bankruptcy to protect her home after she was unable to make the payment.

The woman hired a lawyer to sue Navient, claiming that bankruptcy was supposed to change her debt because it was a private loan.

“They just don’t see that, on the other hand, borrowers have families. I have loans and this affects my children. How can I send them to college? ”McDaniel wonders.

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The case of McDaniel is not the only one.

In 2017, the Illinois attorney general sued Navient and Sallie Mae, accusing the company of subprime lending fraud, failure to offer proper repayment options and improper fundraising practices.

“We are worried about private student loans. They do not have the same protection for borrowers as the federal ones, ”said Ashley Harrington, senior political adviser on student debt at the Non-Party Responsible Lending Center (CRL).

She said that to provide private student loans, they often use sub-standard lending methods and give loans to those who probably will not be able to repay them. Harrington adds that the problem concerns blacks, Hispanics, Indians, and women.

Sallie Mae claims to be not liable for McDaniel’s lawsuit.

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“We believe that Navient, a separate and independent company from Sallie Mae, is responsible for all disputed obligations,” the company said in a statement.

But the accusation of Navient does not coincide with the company's own advertising. On its website, Sallie Mae advertises the 43 of “America's College Pay Aid” - more than McDaniel’s age.

Navient claims that the lawsuit is "unfounded." Despite the allegations that the company issued private loans, knowing that students would not be able to repay them, Navient nevertheless insists: all loans were issued in good faith.

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