Sallie Mae Braces For Nearly $200 Million In Penalties As Education Department Ponders Next Move

Sallie Mae and its former loan servicing unit have struck a deal with federal authorities to resolve allegations that the nation's largest student loan company cheated active duty troops, as well as other borrowers who were being charged late fees.

The two companies more than doubled to $173 million the amount they have set aside to cover settlements resolving allegations brought by the Federal Deposit Insurance Corp. and the Department of Justice.

Sallie Mae Cheated Soldiers On Federal Student Loans, Government Investigators Find

Federal investigators have uncovered evidence that Sallie Mae cheated active-duty soldiers on federal student loans, according to people familiar with the matter.

The findings, if eventually made public as part of a lawsuit or settlement agreement, may threaten Sallie Mae's lucrative contract with the U.S. Department of Education to collect payments on federal student loans. The department's contract requires loan servicers comply with all federal laws when handling federal student loans.

Education Department Finds Numerous Problems At Sallie Mae, Levies No Fines

The U.S. Department of Education has declined to levy any fines on student loan giant Sallie Mae despite secret determinations over the past 10 years that allege the company has harmed borrowers, incorrectly billed the department and had other servicing failures.

The allegations, detailed in a Dec. 9 letter from the Education Department to Sen. Elizabeth Warren (D-Mass.), for the first time provide a glimpse into the extent of problems plaguing the $1 trillion federal student loan portfolio, and the apparently lackluster department response to faulty behavior by companies that interact with borrowers on its behalf and collect payments on government-backed student debt. The letter was obtained by The Huffington Post.

Elizabeth Warren: Education Department Shouldn't Be A 'Lapdog'

The U.S. Department of Education risks becoming a “lapdog” as a result of recent actions toward financial companies such as Sallie Mae, Sen. Elizabeth Warren charged Thursday.

The Massachusetts Democrat said she was “deeply concerned” by a Huffington Post report that the Education Department had recently told Sallie Mae, the nation’s largest handler of student loans, that it intended to renew its federal contract to collect payments on federal student loans, despite pending investigations by at least three other federal agencies over allegations the company violated borrowers’ rights.

Education Department To Renew Sallie Mae Contract, Despite Allegations Of Wrongdoing

Student loan giant Sallie Mae is currently under fire from lawmakers, federal regulators, consumer groups and student advocates for allegedly violating numerous consumer protection laws. The company is facing accusations that it cheats soldiers on active duty, engages in discriminatory lending, pushes borrowers into delinquency by improperly processing their monthly payments, and doesn't provide enough aid to borrowers in distress.

CFPB Takes Aim At Sallie Mae For Student Loan Servicing

A federal consumer regulator has taken aim at the Department of Education’s preferred companies for servicing the agency’s $1 trillion in student loans, highlighting potentially poor customer service and raising the specter of increased government scrutiny.

The move, in the form of a Monday blog post by the Consumer Financial Protection Bureau’s top student loan official, relied on Education Department surveys, which grade the four preferred companies -- SLM Corp., or Sallie Mae; Nelnet; FedLoan Servicing, or the Pennsylvania Higher Education Assistance Agency; and Great Lakes Higher Education Corporation & Affiliates -- and determine how many new loans each will receive in the coming year to service as a new crop of students enter college and graduate.

Sallie Mae Profit Boosts College Endowments And Pension Funds As Students Pay More

University endowments and teachers’ pension funds are among big investors in Sallie Mae, the private lender that has been generating enormous profits thanks to soaring student debt and the climbing cost of education, a Huffington Post review of financial documents has revealed.

The previously unreported investments mean that education professionals are able to profit twice off the same student: first by hiking the cost of tuition, then through dividends and higher valuations on their holdings in Sallie Mae, the largest student lender and loan servicer in the country, which profits by charging relatively high interest rates on its loans and not refinancing high-rate loans after students graduate and get well-paying jobs.