Trouble Consolidating Sallie Mae Loans, Part 1

Posted on August 30, 2008 21 Comments

A few weeks ago, my super talented, creative and beautiful cousin, K, 23, called me in tears. She just graduated from the Harrington Institute of Design in Chicago, and like most of us, was blown away by the cost of her monthly payments on her loans.

She went to see her family’s banker to find out how to lower her monthly payment – which, by the way, was the cost of a mortgage. The banker, likely unaware of what it actually costs to go to college these days, chastised K for spending too much on her education and taking out too many loans. She basically said, “Good luck. There’s nothing I can do.”

K felt totally taken aback, helpless and frustrated. Nothing she had done throughout her long education had prepared her for this. Her parents, though upset, had no answers. And so, on a random Wednesday morning, I received a frantic call from K, pleading to meet with me and learn more about how to consolidate loans.

I directed her to this site, to my consolidation post. I told her that a lot of people have a similar debt upon earning a master’s degree, and that many of my friends in similar situations had consolidated their loans for lower monthly payments. I encouraged her to look into consolidation options.

But in later conversations, we hit a bump in the road. K had taken out her loans through Sallie Mae. She thought that meant they were government loans when she took them out. (Like many, she thought “student loans” automatically meant they were borrowed from the government.) But it turns out, they’re through a private bank. The interest rates are much higher than they should be, but she wasn’t sure if she could consolidate them through the government Web site, which appeared to be only for government loans. What’s a girl to do?

I consulted my bookshelf, but all the books I found only talked about government loans. Most of my friends my age had government loans, but as I spoke with our younger interns and my brothers, I realized something had changed in recent years. Everybody has Sallie Mae loans now. But I got the sense that nobody really knew why they had them, and that the borrowers thought they had government loans.

So, what is Sallie Mae? Are Sallie Mae loans government loans?

Sallie Mae was originally created as The Student Loan Marketing Association in 1972 as a “government sponsored entity.” According to its Web site, it began privatizing operations in 1997, and in 2004 “terminated its ties to the federal government.” It is now a publicly traded, for-profit company, and is the leading provider of student loans and administrator of college savings plans. It currently owns or manages loans for 10 million people in the US.

Got that? It’s a private company that lends money to 10 million people, NOT a government entity.

Interestingly, I visited the consolidation portion of the Sallie Mae site today, and got this message:

“Thank you for your interest in Sallie Mae, the nation’s leading provider of saving- and paying-for-college programs. Severe legislative cuts made by Congress made federal student loan consolidation uneconomical. This, combined with the credit market deterioration, has caused us to suspend participation in the federal consolidation loan program.”

And below some corporate babble about the mission of the company, this:

“Sallie Mae reserves the right to modify or discontinue loan programs at any time without notice.”

I went on the student loan site, where I consolidated my loan, and found nothing about Sallie Mae loans. Only a list of what is an “eligible” loan (mostly looked like Direct Loans, Stafford Loans, etc.) and what is “ineligible,” including private loans.

So how do we make sense of this all? I’m no expert, and truth be told, I found most of the information online to be very confusing and hard to navigate. This was the closest article I found:

From SmartMoney, April 2008
Sallie Mae Halts Student Loan Consolidation
…As a result, borrowers will have to pay the price. Former students who want to consolidate their loans can now only turn to the government and a small pool of lenders.

Read the whole article here: SmartMoney

I’m going to do some more digging, and certainly if you have more information, post it here. For the time being, my brother, who used to work at a bank, advised my cousin K to look into Chase Bank’s Private Student Loan Consolidation options. He has a similar amount of debt, but consolidated all his loans through Chase and they are roughly $600 to $1,000 cheaper per month than hers were expected to be through Sallie Mae.

For those of you wading through the student loan waters, check out www.FinAid.org to learn more. For me, the student loan process was easy, but talking with K and others about their trouble has been an eye-opening experience.

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Comments

21 Responses to “Trouble Consolidating Sallie Mae Loans, Part 1”

  1. Anonymous
    August 30th, 2008 @ 11:32 pm

    Because my wife has Sallie Mae loans and their service is godaweful,I spoke to the Department of Education about their direct loan program. According to the guy on the phone, they can consolidate Sallie Mae loans. They are going to send me the paperwork.

    The DOE manages my loans and does a bang up job.

  2. Tanja
    August 31st, 2008 @ 12:51 am

    I consolidated my loans with sally at 3.125% few years back. Since then I did not look in to any of it again.

  3. Strange Bird
    August 31st, 2008 @ 1:53 am

    That is really frightening because when my boyfriend was looking to consolidate his loans two years ago, Sallie Mae would not release his loans to be consolidated by another company. Now that they no longer offer loan consolidation, I hope they have changed that policy!

  4. Erin
    August 31st, 2008 @ 5:02 am

    I have my loans through Sallie Mae, but they are Stafford loans (and this year, they weren’t an option when I went to pick a lender). So I think they do both? At least I hope so…

  5. EM
    August 31st, 2008 @ 3:38 pm

    My husband has Sallie Mae loans as well, and we are looking into consolidating not only these loans, but a couple of small ones he has from the government. I’m interested to see what you find out in your research…

  6. Sallie's Niece
    September 3rd, 2008 @ 2:12 pm

    Most student loans are offered through private banks and loan companies, not the government, but the government does insure most of these loans. Sallie Mae, however, offers “private loans” as well as the government-insured ones. Those, in my experience, cannot be consolidated. Some others have found companies that do consolidate them but you have to have near perfect credit (try Citi for example – but they rejected me).

    The government (Department of Ed) has started facilitating consolidation – but once again, only of the insured loans, not of the “private loans.”

    Finaid.org has a lot of info on this topic.

  7. bburns1977
    September 3rd, 2008 @ 9:40 pm

    Nicole – Sallie Mae was initially thought up as a “Government Sponsored Entity” similar to the way Fannie Mae and Freddie Mac were organized to support home lending. These companies are not legally part of the government, but did get some subsidies to facilitate the lending of money for homes and in Sallie’s case, education. They are now publically traded companies. A previous poster did mention that some SM loans are government insured/subsidized, so if she has any of those, I believe those can be consolidated. If they are not, her only option is to seek out private lenders for the consolidation.

    Another possible option I used to run by my clients was to consider using a home equity loan or line of credit from your parents. I know this is not the most sought after solution, but it will provide two benefits if the student’s parents are in position to do it.

    1. The parents get the interest deduction on the interest for their taxes.

    2. The student gets a significantly lower rate than you will probably find on the market.

    This solution is not without risk, the most obvious of which is that if payments fall behind, it can create an awkward situation for the family.

    If you or your cousin want to discuss further, give me a call.

    Bob

  8. Anonymous
    October 1st, 2008 @ 5:17 pm

    What would be the number I would have to call for the DOE? I just got my bill $547 for the next 10 years. When I went into school I was married and have since divorced. I have 2 jobs and there is still no way I can cover that payment plan.

  9. Anonymous
    October 22nd, 2008 @ 12:06 am

    I am in the EXACT same boat as your article states (thanks to Harrington College of Design). I exhausted my Federal funds, and the last few loans I needed to complete my second degree were ONLY offered to me by Sallie Mae through Harrington. I’m now faced with this JAW DROPPING debt. At this point, I’m simply looking for answers (as your cousin is). Please keep me informed. Note: I’ve had NO ISSUE consolidating my federal loan funds (at a reasonable interest rate of 3%). I have no idea how to handle this Sallie Mae mess that could eventually cost a quarter million dollars (totally rediculous).

  10. Anonymous
    December 31st, 2008 @ 8:16 pm

    Has anyone been able to Consolidate their Sallie Mae loan??? It is a signature loan. Help if you have info email ladyfeather2@yahoo.com
    Cindy

  11. Anonymous
    January 24th, 2009 @ 12:10 am

    And, you want to know the worst part—when you call them–not only do you get disconnected 4-5 times (I’m very persistent even though it took calling them 4 times and putting my loan number in 4 times)plus being on hold 22 minutes and then I found out I was talking to India. Geez! I might as well have been talking to my cat for all that the guy understood what I was asking. No, my cat understands more. What is this conspiracy of all our great USA companies and institutions making us talk to India? Well, my questions were not answered as you can well imagine. Needing a student loan? Don’t call Sallie Mae!!

  12. Loan Modification
    January 28th, 2009 @ 7:04 am

    College is becoming increasingly difficult to afford.
    Borrowing money for college is a big responsibility but college remains a smart investment for obtaining a satisfying career that earns a competitive salary. Nice post.

  13. Anonymous
    March 1st, 2009 @ 9:59 am

    I have been reading your blog. I thought it’s nice blog.

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  14. Anonymous
    March 14th, 2009 @ 12:27 am

    I’m also going through the same thing with Sallie Mae. I’m so fed up with those people. I have 6 loans through them and the interests rates are high and they charge me for each loan every month!. I’m going to call the number for Chase bank hopefully they can help since I’ve been turned down several times because Sallie Mae wouldn’t allow my loans to be consolidated through another bank. Keep me posted on what you find out.

  15. student loans for people with bad credit
    April 10th, 2009 @ 3:16 pm

    Thanks for good post.

  16. loans for student
    April 14th, 2009 @ 4:10 am

    hmm, really?

  17. pay student loan
    April 14th, 2009 @ 4:13 am

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  18. Anonymous
    April 28th, 2009 @ 6:20 pm

    I am living in the S.F bay (CA) a recent graduate from the San Fransisco Conservatory of Music with over 170,000$ in student, Salie Mae being the biggest of the bulk. Back when I tried to plea and deal with them my credit was around 750 and still receiving 14% intrest!! (4 loans total varing from 8.99% to 13.99%. It was crazy as I had consolidated goverment loans that were very low intrest rates and easy to deal with. I really like wells fargo for consolidating both types. …So here’s the catch, in order to go for my Masters, I had to file for a BK as I was maxed with paying for school, rentect…Salie Mae still being dificult. Even if I pay intrest only every month I still have 750$ to come up with on top of my goverment loans at 375$. and rent, life, ect…
    Crazy times and gotta love them.

  19. popflier
    December 11th, 2009 @ 9:12 pm

    Like many of you I am also in the same situation with SallieMae. I have 2 private loans through them and they have not allowed me to consolidate through another lender. I tried to even consolidate through them and they wouldn't do it. My payments for all of my student loans are the cost of a mortgage and I simply cannot afford it.

    I had career in the music industry for 15 years and as the industry began to fall apart I had decided to return to school and change industries all together. 1 month after I graduated I was laid off and have been able to find steady work. I am finding that I cannot get a job with my current degree that would pay me enough to cover living expenses and my student loan payments. I don't feel like I have a choice but to look for work in the music industry/marketing capacity where my experience would come into play and I could start at a higher salary. I don't want to work in this industry any longer, but my loans through SallieMae are giving me no choice.

    The worst part about SallieMae is that when I lost my job and went into forbearance they told me that I had to PAY THEM $50 per loan for every 3 months my loans were in forbearance. I didn't have the money and so they would call me several times a day. Each time I tell them what I told the person earlier that day in that I don't have a job and I don't have the money to pay for forbearance. I told them I didn't understand why they were the only loan company I had who did this and that I thought it was ridiculous. Each time they would tell me that it was part of their policy and that if I couldn't pay that the calls would continue. They then began to ask me if I could borrow the money to pay them and wanted to know how I was able to live and who was supporting me and asked if they could pay. I threatened to call the FTC and the Attorney General and report them for harassment. The calls slowed down, but didn't stop until I did borrow the $100 to pay them for forbearance for 3 months. That period has now ended and once again I cannot pay the monthly payments they are asking.

    I'm desperate at this point and really need to consolidate my loans somehow. I'm going to look into the DOE, but if anyone has any other ideas please email me. Since I still don't have regular work it makes it hard to have ANY options.

    nicole
    nico@popflier.com

  20. Anonymous
    January 25th, 2010 @ 11:35 pm

    Sallie Mae is trying to have me pay 41% of my take home pay.

    is that legal?

  21. journey2mymba
    February 19th, 2010 @ 4:20 am

    good post…I need to consolidate my Sallie Mae signature loans. I guess I am out of luck. Also, I am about to go back to school and get even more debt. I am studying something that I know will pay well this time so hopefully things will get better.

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