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14 ноября 2016, 21:01

Nelnet downgraded to neutral from outperform at Credit Suisse

This is a Real-time headline. These are breaking news, delivered the minute it happens, delivered ticker-tape style. Visit www.marketwatch.com or the quote page for more information about this breaking news.

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09 августа 2016, 02:03

Why A Special Circle Of Student Loan Hell Is Reserved For College Dropouts

Just in case it wasn't already bad enough to be a recent Millennial college graduate in the US with tens of thousands in student debt (recall that of those lucky enough to have a job after graduation, roughly half live paycheck to paycheck; as for those without a job, well... our condolences), it turns out there is a special circle in student loan hell reserved for those who never manage to graduate. Because as Bloomberg reports, when it comes to collecting on student loans, the U.S. Department of Education treats college dropouts the same as Ivy League graduates: They just want the money back. But that's only part of the bad news. It will come as no surprise that when it comes to wage potential, dropouts are in a category of their own. The dead last category. Unlike peers who earn degrees, dropouts generally don't command higher wages after leaving school, making it harder for them to repay their student debt. The typical college dropout experienced a steep fall in wealth from 2010 to 2013, figures from the Federal Reserve in Washington show, and an 11 percent drop in income—the sharpest decline among any group in America. Worse, dropouts who took out loans to finance the degrees they ultimately didn't obtain often end up worse off for attending college. It should therefore, as Bloomberg writes, come as no surprise that half of federal student loan borrowers who dropped out of school within the past three years are late on their payments, according to Education Department figures provided to Bloomberg. More than half of those delinquent borrowers are at least 91 days behind. By comparison, just 7.2 percent of recent college graduates are more than three months late on their debt. There are two immediate takeaways from the figures, according to the author.  The first is that higher education experts eager to put families at ease about the increasing cost of college are likely to conclude that whatever crisis exists in student loans is concentrated among college dropouts, so graduates needn't worry. This is largely how the Education Department and the White House view the issue. The department recently focused its efforts on improving graduation rates, hoping it will lead to fewer loan defaults. But it's unlikely that approach will yield benefits soon. Graduation rates have increased by less than five percentage points over the past dozen years, federal data show. The problem with this approach is that even the NY Fed recently admitted that it is not just the dropouts who are impacted as student loans are the primary culprit for record wealth inequality in the US: a demographic that is far broader than just the narrow dropout subset. The second takeaway is that it's time for the Education Department and its loan contractors to pay special attention to the groups of borrowers most likely to struggle with their debt. The Education Department outsources the work of collecting payments and counseling borrowers on their repayment options to loan contractors such as Navient Corp. and Nelnet Inc. The government pays these contractors about six times more for accounts that are current rather than seriously delinquent, regardless of the costs the companies incur to help borrowers resolve their delinquency. Loan companies say they simply don't get paid enough to help the neediest borrowers. As such, the segment of the US population most in need of counseling, and outright help, is least likely to get it. And this is happening under an 8-year progressive agenda. Bloomberg adds that the Education Department has known for years that the typical borrower who defaults on her debt didn't graduate with a credential, federal records show. Yet its Federal Student Aid office—the somewhat independent unit that runs the government's student loan program—doesn't mandate special procedures for its contractors' dealings with borrowers most at risk of default. Instead, FSA gives its loan contractors "broad latitude" to handle borrowers' accounts. And while the conclusion of the original piece is admirable, namely that the government should intervene on behalf of the borrowers and negotiate with the loan contractors to ease terms of the loan, adding that last month, the department directed FSA to structure its next round of contracts in a way that guarantees that dropouts would quickly get help with their loans from specially trained customer service representatives, the real story here is a simple one, and one we have repeated for a long time: the government should admit that the current higher learning paradigm is flawed, where as a result of ultra low rates, college tuition is soaring, but due to the unprecedented ease in attaining student debt, few find college costs to be a gating factor no matter how bleak the practical outcomes of a college education may be for loan repayment or future income potential. As such what the government should do is overhaul the entire process of setting college tuition, which in recent years has exploded at a rate that is orders of magnitude higher than that of core inflation. And since ultimately this is not a government decision but one driven by simple monetary dynamics, and blessed by a low cost of money, the real culprit here is the Fed (the same Fed which ironically just last week found that student loans are the cause behind America's wealth divide) which by keeping the rates at zero, assures that problems faced by both college grads - and dropouts - will only get worse. And yes, as even the Fed will now admit, the wealth divide in the US will only get more profound as the populist tensions revealed not only by Brexit but by the ongoing summer of rage in the US hit a breaking point at which point the Fed's decision will finally be taken out of its hands.

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17 июня 2016, 22:40

Nelnet tries to stave off student loan ABS downgrades

NEW YORK (IFR) - Student loan servicer Nelnet is trying to stave off downgrades on US$3.25bn of its debt, and wants investors to help by agreeing to extend the maturity date of its bonds.

10 декабря 2014, 09:33

Congressional Leaders Agree To Cut Aid To College Students To Pay Student Loan Contractors

House and Senate leaders have agreed to cut funding for the nation’s largest source of grants for college students to pay student loan contractors, according to legislation that would fund the federal government through next year and avert a shutdown. Money appropriated for the Pell grant program this year would fall $303 million, or 1.3 percent, to $22.5 billion, according to a proposal first introduced over the summer by retiring Sen. Tom Harkin (D-Iowa). Most of those funds would instead be used to pay private contractors that collect borrowers’ monthly student loan payments. Harkin has defended the move as necessary. The provision, which faced a flurry of criticism after it was revealed in a Huffington Post article published Saturday, was expected. Lawmakers are likely to pass the more than $1 trillion spending bill in the coming days. The government's spending authority expires Thursday. The cuts come amid an era of record college costs, skyrocketing student debt burdens and decreasing government support for state schools. The Pell program has a budget surplus that is forecast to turn into a deficit in two years. Cuts to the program would likely lead college students to increase the amount they borrow, further driving up the nation’s $1.3 trillion stack of unpaid student loan bills. Meant for low-income students, three of every four Pell recipients during the 2012-13 award year had household incomes of $30,000 or less, according to the Department of Education. Nearly 8.9 million students are forecast to receive on average $3,826 from the program this fiscal year, White House budget documents show. The Department of Education’s student loan servicers -- companies that counsel borrowers, set them up with repayment plans and collect their monthly checks -- are set to reap the rewards from lawmakers’ cuts to Pell. They’ll get up to $721.7 million, an $8 million cut from last year, but a nearly $44 million increase compared with 2013. The cash comes at a time when the Education Department’s loan servicers are under intense scrutiny. Federal officials have accused them of mistreating borrowers and hurting taxpayers, state attorneys general are probing their allegedly anti-consumer practices, and some student advocates are pushing for their lucrative contracts to be terminated. Nearly 23 percent, of loans in the government’s main student loan program are either delinquent or in default, according to a Dec. 1 presentation by the Education Department. Given the availability of generous federal repayment plans, consumer advocates point to poor servicing practices as a reason behind high delinquency rates. Federal policymakers worry the growing ranks of troubled borrowers will sap economic growth in the coming years. President Barack Obama in June questioned the Education Department’s loan servicers’ commitment to helping borrowers manage their student debt. The Department of Justice in May accused one of the government’s loan servicers, Navient Corp., formerly known as Sallie Mae, of deliberately cheating as many as 60,000 active-duty troops out of as much as $60 million. Navient neither admitted nor denied wrongdoing. Despite those concerns, it seems at the moment that the Obama administration and congressional leaders are more concerned with ensuring payments to companies such as Navient and Nelnet Inc. than helping college students pay for college. “This bill takes a thoughtful approach to funding these critical programs because it funds America’s priorities and it is how we invest in our future,” Harkin, the Senate’s leader on education issues, said in a prepared statement. A spokeswoman, Susannah Cernojevich, did not make Harkin available for an interview. In July, a Harkin-led Senate appropriations subcommittee explained its decision to cut funding for Pell grants to instead pay student loan contractors by pointing to the recent elimination of a pot of money previously set aside exclusively for loan servicing. But neither Harkin nor his staff have publicly explained why the money to pay for servicing had to come from Pell. The pay bump for loan servicers reflects an Education Department view that more money will lead to improved customer service for borrowers. Some lawmakers, student advocates and federal policymakers want the Education Department to instead force better service by enforcing existing contracts or opening them to more prospective bidders. 

10 декабря 2014, 09:33

Congressional Leaders Agree To Cut Aid To College Students To Pay Student Loan Contractors

House and Senate leaders have agreed to cut funding for the nation’s largest source of grants for college students to pay student loan contractors, according to legislation that would fund the federal government through next year and avert a shutdown. Money appropriated for the Pell grant program this year would fall $303 million, or 1.3 percent, to $22.5 billion, according to a proposal first introduced over the summer by retiring Sen. Tom Harkin (D-Iowa). Most of those funds would instead be used to pay private contractors that collect borrowers’ monthly student loan payments. Harkin has defended the move as necessary. The provision, which faced a flurry of criticism after it was revealed in a Huffington Post article published Saturday, was expected. Lawmakers are likely to pass the more than $1 trillion spending bill in the coming days. The government's spending authority expires Thursday. The cuts come amid an era of record college costs, skyrocketing student debt burdens and decreasing government support for state schools. The Pell program has a budget surplus that is forecast to turn into a deficit in two years. Cuts to the program would likely lead college students to increase the amount they borrow, further driving up the nation’s $1.3 trillion stack of unpaid student loan bills. Meant for low-income students, three of every four Pell recipients during the 2012-13 award year had household incomes of $30,000 or less, according to the Department of Education. Nearly 8.9 million students are forecast to receive on average $3,826 from the program this fiscal year, White House budget documents show. The Department of Education’s student loan servicers -- companies that counsel borrowers, set them up with repayment plans and collect their monthly checks -- are set to reap the rewards from lawmakers’ cuts to Pell. They’ll get up to $721.7 million, an $8 million cut from last year, but a nearly $44 million increase compared with 2013. The cash comes at a time when the Education Department’s loan servicers are under intense scrutiny. Federal officials have accused them of mistreating borrowers and hurting taxpayers, state attorneys general are probing their allegedly anti-consumer practices, and some student advocates are pushing for their lucrative contracts to be terminated. Nearly 23 percent, of loans in the government’s main student loan program are either delinquent or in default, according to a Dec. 1 presentation by the Education Department. Given the availability of generous federal repayment plans, consumer advocates point to poor servicing practices as a reason behind high delinquency rates. Federal policymakers worry the growing ranks of troubled borrowers will sap economic growth in the coming years. President Barack Obama in June questioned the Education Department’s loan servicers’ commitment to helping borrowers manage their student debt. The Department of Justice in May accused one of the government’s loan servicers, Navient Corp., formerly known as Sallie Mae, of deliberately cheating as many as 60,000 active-duty troops out of as much as $60 million. Navient neither admitted nor denied wrongdoing. Despite those concerns, it seems at the moment that the Obama administration and congressional leaders are more concerned with ensuring payments to companies such as Navient and Nelnet Inc. than helping college students pay for college. “This bill takes a thoughtful approach to funding these critical programs because it funds America’s priorities and it is how we invest in our future,” Harkin, the Senate’s leader on education issues, said in a prepared statement. A spokeswoman, Susannah Cernojevich, did not make Harkin available for an interview. In July, a Harkin-led Senate appropriations subcommittee explained its decision to cut funding for Pell grants to instead pay student loan contractors by pointing to the recent elimination of a pot of money previously set aside exclusively for loan servicing. But neither Harkin nor his staff have publicly explained why the money to pay for servicing had to come from Pell. The pay bump for loan servicers reflects an Education Department view that more money will lead to improved customer service for borrowers. Some lawmakers, student advocates and federal policymakers want the Education Department to instead force better service by enforcing existing contracts or opening them to more prospective bidders. 

30 октября 2014, 00:05

Education Department Investigation Clears Student Loan Companies, Sources Say

In May, Education Secretary Arne Duncan ordered his investigators to conduct a "thorough review" of the nation's four largest student loan servicers, following allegations that the companies may have cheated active duty troops out of millions of dollars by overcharging them on their federal student loans. The official results of the review are still pending. But according to people with knowledge of the investigation, the review has found little evidence of wrongdoing -- a conclusion that has surprised senior Education Department and Justice Department officials and called into question the Education Department's ability to supervise the student loan companies with which it contracts to collect borrowers’ monthly payments. Under the federal Servicemembers Civil Relief Act, active duty service members are allowed to have the interest rate on their student loans capped at 6 percent. But in October 2012, the Consumer Financial Protection Bureau said it had received complaints from troops who had called their loan servicers and been steered away from invoking their right to a lower interest rate. Based on some of those complaints, the Justice Department launched an investigation into Sallie Mae, the nation's largest student loan servicer. That investigation culminated in a May 13 complaint against Sallie Mae and Navient Corp. (a student loan specialist that until this year was part of Sallie Mae), which charged the two companies with cheating some 60,000 troops out of $60 million over several years. The companies settled the lawsuit without admitting wrongdoing. Alarmed by the allegations, the Education Department sought to determine whether any of its student loan servicers were breaking the law by misleading active duty troops, and the extent of such wrongdoing. While the Justice Department's investigation had been limited to Sallie Mae and Navient, the Education Department's review was expanded to include its other student loan contractors: Nelnet, Inc., Great Lakes Higher Education Corp. & Affiliates, and the Pennsylvania Higher Education Assistance Agency. Federal officials expected the results of the Education Department's review to mirror the Justice Department's findings. Instead, sources close to the probe said investigators in the Education Department's Federal Student Aid office found the opposite: Few troops had been improperly denied their benefits under federal law. The conclusion is based on a review in which a handful of FSA compliance staff combed through loan files of dozens of borrowers at each of the Education Department’s four major loan servicers. “We all thought that this was going to be low-hanging fruit,” one FSA employee, who requested anonymity because he was not authorized to discuss the investigation, told The Huffington Post. “It appears not to be the case.” The conclusion has apparently startled senior officials in Washington and raised concerns about how the FSA office has conducted its investigation. As a result, the Education Department has asked investigators from the FSA's Financial Institution Oversight Service Group to conduct a broader review of student loan borrowers' files, according to federal officials with knowledge of the investigation. The department is also considering hiring a private-sector auditor to conduct a separate probe. Dorie Nolt, an Education Department spokeswoman, declined to comment on the investigation. Dena Iverson, a Justice Department spokeswoman, also declined to comment. Representatives for the four loan companies did not respond to repeated requests for comment. The disconnect between what the Justice Department expected and what the FSA found has led some FSA employees to challenge the validity of the reported harm detailed in the Justice Department’s complaint against Sallie Mae and Navient, federal officials told HuffPost. FSA employees pointed out that the Justice Department’s estimate of harmed troops was based on what Navient described as a “high-level independent review." It was “not a formal audit of approval rates, nor was it a comprehensive file-by-file account review,” Navient said. Rather, the review was “undertaken to quickly identify” the number of potentially cheated borrowers. According to confidential documents obtained by HuffPost, the auditor that conducted the review was Deloitte & Touche LLP. Dan Mucisko, a spokesman for Deloitte, didn’t respond to requests for comment. If the Education Department indeed did not find any violations, part of the reason may have been due to to how the department defined wrongdoing. Federal law requires troops to request the interest rate benefit in writing and to provide their loan companies with a copy of their military orders calling them to active duty. When FSA investigators looked for instances in which troops had requested a lower interest rate in writing but didn’t receive it, they found few lapses, according to people involved with or briefed on the results of the review. But the Education Department didn’t look into whether borrowers had called their loan companies to discuss their rights under federal law, or whether they had verbally expressed any interest in a reduced interest rate. In some cases, according to people familiar with the results of the review, FSA investigators found that loan companies had allowed active-duty troops to postpone their required monthly payments, but didn’t bother to reduce the interest rate on their loans. According to the consumer bureau's earlier inquiry, one of the reasons troops didn't formally request the interest rate benefit was because student loan companies had steered them away from doing so when the troops called the companies on the phone seeking information. As a result of the Justice Department's settlement with Sallie Mae and Navient, the Education Department earlier this year instructed its student loan companies to automatically reduce borrowers' rates upon learning that the borrowers are on active duty. That rule change may help current borrowers, but it doesn’t cover all troops who may have been harmed previously. Navient agreed as part of its settlement to refund aggrieved troops who didn't receive a reduced interest rate but were eligible for it. The Education Department has examined its own potential liability if it were to issue refunds to cheated troops, according to department records obtained by HuffPost. It’s unclear why the Education Department's review, as sources described it, did not include troops who had contacted student loan companies about the interest rate benefit by telephone. The FSA investigators' findings risk embarrassing the Education Department, which is under scrutiny for how it supervises the loan servicers and debt collectors it pays to interact with the roughly 40 million borrowers with federal student loans, and how it responds to concerns that borrowers are routinely mistreated and given bad information. Sen. Elizabeth Warren (D-Mass.) last year said the department risks becoming a “lapdog” -- rather than a watchdog -- as a result of its allegedly deficient supervision and past decisions to not punish wrongdoing. Earlier this year, the Government Accountability Office and the Education Department’s inspector general pilloried the department’s supervision of its debt collectors, reprimanding the department for ignoring borrowers’ complaints and looking the other way when wrongdoing was found. In another case, the department said last month it would continue pursuing borrowers over their unpaid debts while shielding their former schools from crippling sanctions that would have resulted from high student loan default rates. And in August, in response to worries from student advocates and consumer groups about its contractors mistreating borrowers, the department decided to pay them more money in hopes that increased funding would lead to better customer service. To regulators, however, the mistreatment of active duty troops is of particular concern. “Servicer breakdowns for the military population may be a canary in the coal mine for systemic problems facing all student loan borrowers,” Rohit Chopra, student loan ombudsman at the CFPB, said in an interview. “If a servicer is unable to provide adequate service to those who have special protections under the law, it does raise real questions about whether there is more widespread harm to the broader borrower population.”

30 октября 2014, 00:05

Education Department Investigation Clears Student Loan Companies, Sources Say

In May, Education Secretary Arne Duncan ordered his investigators to conduct a "thorough review" of the nation's four largest student loan servicers, following allegations that the companies may have cheated active duty troops out of millions of dollars by overcharging them on their federal student loans. The official results of the review are still pending. But according to people with knowledge of the investigation, the review has found little evidence of wrongdoing -- a conclusion that has surprised senior Education Department and Justice Department officials and called into question the Education Department's ability to supervise the student loan companies with which it contracts to collect borrowers’ monthly payments. Under the federal Servicemembers Civil Relief Act, active duty service members are allowed to have the interest rate on their student loans capped at 6 percent. But in October 2012, the Consumer Financial Protection Bureau said it had received complaints from troops who had called their loan servicers and been steered away from invoking their right to a lower interest rate. Based on some of those complaints, the Justice Department launched an investigation into Sallie Mae, the nation's largest student loan servicer. That investigation culminated in a May 13 complaint against Sallie Mae and Navient Corp. (a student loan specialist that until this year was part of Sallie Mae), which charged the two companies with cheating some 60,000 troops out of $60 million over several years. The companies settled the lawsuit without admitting wrongdoing. Alarmed by the allegations, the Education Department sought to determine whether any of its student loan servicers were breaking the law by misleading active duty troops, and the extent of such wrongdoing. While the Justice Department's investigation had been limited to Sallie Mae and Navient, the Education Department's review was expanded to include its other student loan contractors: Nelnet, Inc., Great Lakes Higher Education Corp. & Affiliates, and the Pennsylvania Higher Education Assistance Agency. Federal officials expected the results of the Education Department's review to mirror the Justice Department's findings. Instead, sources close to the probe said investigators in the Education Department's Federal Student Aid office found the opposite: Few troops had been improperly denied their benefits under federal law. The conclusion is based on a review in which a handful of FSA compliance staff combed through loan files of dozens of borrowers at each of the Education Department’s four major loan servicers. “We all thought that this was going to be low-hanging fruit,” one FSA employee, who requested anonymity because he was not authorized to discuss the investigation, told The Huffington Post. “It appears not to be the case.” The conclusion has apparently startled senior officials in Washington and raised concerns about how the FSA office has conducted its investigation. As a result, the Education Department has asked investigators from the FSA's Financial Institution Oversight Service Group to conduct a broader review of student loan borrowers' files, according to federal officials with knowledge of the investigation. The department is also considering hiring a private-sector auditor to conduct a separate probe. Dorie Nolt, an Education Department spokeswoman, declined to comment on the investigation. Dena Iverson, a Justice Department spokeswoman, also declined to comment. Representatives for the four loan companies did not respond to repeated requests for comment. The disconnect between what the Justice Department expected and what the FSA found has led some FSA employees to challenge the validity of the reported harm detailed in the Justice Department’s complaint against Sallie Mae and Navient, federal officials told HuffPost. FSA employees pointed out that the Justice Department’s estimate of harmed troops was based on what Navient described as a “high-level independent review." It was “not a formal audit of approval rates, nor was it a comprehensive file-by-file account review,” Navient said. Rather, the review was “undertaken to quickly identify” the number of potentially cheated borrowers. According to confidential documents obtained by HuffPost, the auditor that conducted the review was Deloitte & Touche LLP. Dan Mucisko, a spokesman for Deloitte, didn’t respond to requests for comment. If the Education Department indeed did not find any violations, part of the reason may have been due to to how the department defined wrongdoing. Federal law requires troops to request the interest rate benefit in writing and to provide their loan companies with a copy of their military orders calling them to active duty. When FSA investigators looked for instances in which troops had requested a lower interest rate in writing but didn’t receive it, they found few lapses, according to people involved with or briefed on the results of the review. But the Education Department didn’t look into whether borrowers had called their loan companies to discuss their rights under federal law, or whether they had verbally expressed any interest in a reduced interest rate. In some cases, according to people familiar with the results of the review, FSA investigators found that loan companies had allowed active-duty troops to postpone their required monthly payments, but didn’t bother to reduce the interest rate on their loans. According to the consumer bureau's earlier inquiry, one of the reasons troops didn't formally request the interest rate benefit was because student loan companies had steered them away from doing so when the troops called the companies on the phone seeking information. As a result of the Justice Department's settlement with Sallie Mae and Navient, the Education Department earlier this year instructed its student loan companies to automatically reduce borrowers' rates upon learning that the borrowers are on active duty. That rule change may help current borrowers, but it doesn’t cover all troops who may have been harmed previously. Navient agreed as part of its settlement to refund aggrieved troops who didn't receive a reduced interest rate but were eligible for it. The Education Department has examined its own potential liability if it were to issue refunds to cheated troops, according to department records obtained by HuffPost. It’s unclear why the Education Department's review, as sources described it, did not include troops who had contacted student loan companies about the interest rate benefit by telephone. The FSA investigators' findings risk embarrassing the Education Department, which is under scrutiny for how it supervises the loan servicers and debt collectors it pays to interact with the roughly 40 million borrowers with federal student loans, and how it responds to concerns that borrowers are routinely mistreated and given bad information. Sen. Elizabeth Warren (D-Mass.) last year said the department risks becoming a “lapdog” -- rather than a watchdog -- as a result of its allegedly deficient supervision and past decisions to not punish wrongdoing. Earlier this year, the Government Accountability Office and the Education Department’s inspector general pilloried the department’s supervision of its debt collectors, reprimanding the department for ignoring borrowers’ complaints and looking the other way when wrongdoing was found. In another case, the department said last month it would continue pursuing borrowers over their unpaid debts while shielding their former schools from crippling sanctions that would have resulted from high student loan default rates. And in August, in response to worries from student advocates and consumer groups about its contractors mistreating borrowers, the department decided to pay them more money in hopes that increased funding would lead to better customer service. To regulators, however, the mistreatment of active duty troops is of particular concern. “Servicer breakdowns for the military population may be a canary in the coal mine for systemic problems facing all student loan borrowers,” Rohit Chopra, student loan ombudsman at the CFPB, said in an interview. “If a servicer is unable to provide adequate service to those who have special protections under the law, it does raise real questions about whether there is more widespread harm to the broader borrower population.”

13 сентября 2014, 00:10

Education Department Sends More Student Borrowers To Firm Just Penalized By DOJ

The Education Department has rewarded a former Sallie Mae unit with more taxpayer-provided business even after the loan servicer, now known as Navient Corp., was accused by federal prosecutors in May of intentionally cheating troops on their federal student loans. The official announcement late Thursday, of a decision previously reported by The Huffington Post, also comes despite the Education Department's own pending probe into evidence amassed by the Justice Department that Sallie Mae and Navient overcharged some 60,000 troops by tens of millions of dollars. The results of that probe likely will be made public this month, the Education Department has said. The two companies settled the federal prosecutors' allegations without admitting or denying wrongdoing. Education Secretary Arne Duncan said in May that his department would further investigate their conduct with "no presumption of guilt or innocence." Navient was spun out from Sallie Mae earlier this year. The Education Department, which annually pays loan servicing companies hundreds of millions of dollars to interact with borrowers and collect their monthly payments, said late Thursday that Navient had improved its standing relative to the department's three other major loan servicers. An analyst who follows Navient on behalf of investors said the department will likely place about 30 percent more loans with the company than it did last year. "It sends a clear message to borrowers: If you misstep, there are consequences. If your servicer missteps, they're let off the hook and rewarded," said Chris Hicks, who leads the Debt-Free Future campaign for the Washington-based nonprofit Jobs With Justice. "For Navient, the message is clear: You're taken care of. We will not discipline you." According to the Education Department's data, Navient finished in third place among the current major loan servicers, based on default statistics and customer satisfaction surveys, and won the right to collect payments on the new loans that will be held by 24 percent of college students taking out federal debt this academic year. The company had the lowest share of borrowers in default. It also had a higher-than-average share of borrowers enrolled in repayment plans that cap monthly payments based on borrowers' earnings. "On behalf of customers and taxpayers alike, we’re proud of our consistent track record of helping more student loan borrowers succeed,” Jack Remondi, Navient's chief executive, said in a statement. Navient had finished last in each of the previous two years. This year's ranking should translate into more than 700,000 new borrowers for the company, according to Michael Tarkan, an analyst at the Washington financial firm Compass Point Research & Trading. That represents a roughly 30 percent increase from last year, when Navient's then-parent, Sallie Mae, won the right to collect payments from 558,000 new borrowers. The company currently services loans on the Education Department's behalf for a total of 5.8 million borrowers. The department's latest move, announced on an obscure government website, is likely to provoke criticism from some congressional Democrats, organized labor, student groups and borrower advocates. Representatives from each of those four groups had previously called on the department to either suspend Navient's ability to receive new taxpayer-provided business, terminate its contract or launch a comprehensive investigation into claims the company harms borrowers. "There is little to no oversight by the Education Department, and when problems are found they're not being addressed," Hicks said. Regarding its handling of federal student loans for the troops, Navient claims that it only followed the Education Department's directions. "The eligibility for the [servicemember] benefit was set forth by Congress with confirming guidance from the Department of Education, which Navient followed," Patricia Christel, a Navient spokeswoman, said in an emailed statement. "The company settled to put this matter behind us while noting there was no determination of a violation of law or rule. Navient did not, nor has it ever, deliberately taken advantage of its military customers and has always worked to ensure they receive the benefits they deserve." In May, Attorney General Eric Holder, with Education Secretary Arne Duncan by his side, announced the Justice Department's settlement with Navient and Sallie Mae. Holder said the practice of preventing troops from reducing the interest rates on their federal and private student loans in violation of the Servicemembers Civil Relief Act "appears to have been the rule, rather than the exception," at the companies. The alleged overcharging of borrowers began in 2005, according to the Justice Department, and it "was intentional, willful, and taken in disregard for the rights of servicemembers.” Duncan called the allegations "troubling." Navient has previously said it was penalized for not complying with what the company described as new interpretations of existing law. Remondi, the company's chief executive, said in May, “We offer our sincere apologies to the servicemen and servicewomen who were affected by our processing errors and thus did not receive the full benefits they deserve." Dorie Nolt, an Education Department spokeswoman, and Education Under Secretary Ted Mitchell, who oversees the Office of Federal Student Aid, did not respond to messages seeking comment. FSA is responsible for the federal student loan system. In addition to the new borrowers already awarded, Navient is also a finalist for a separate Education Department contract that could be worth up to $1 billion over the next decade. It was selected as a finalist for the lucrative contract two weeks after its settlement with the Justice Department. President Barack Obama, who has presided over a near doubling of unpaid federal student debt, directed the Education Department in June to rework its loan servicing contracts with companies such as Navient after months of criticism regarding their lackluster customer service and inability to stem the rising tide of loan defaults. Even the Treasury Department has publicly challenged the Education Department and its contractors over how they handle borrowers struggling with student debt. Last month, the department announced it had renegotiated its contracts. On Wednesday, William Leith, chief business officer at FSA, testified before a Senate committee that the department would end up paying its loan servicers "a little bit more" money as a result -- even if their performance doesn't improve. Sen. Elizabeth Warren (D-Mass.), who has heavily criticized the Education Department's oversight of Navient and Sallie Mae, was not pleased. "Let me get this straight: You break the law. You don't follow the rules. You treat the borrowers badly," Warren said of the loan servicers. "And you all just renegotiated the contracts to make sure that across the portfolio [loan servicers] are going to make a little more money if nothing changes?" The new contracts specify that companies such as Navient will receive more money if they keep borrowers current on their loans and less if the borrowers fall behind or postpone payments. The goal, according to the Education Department, is to incentivize servicers to keep borrowers in good standing. Separately, beginning next year, the Education Department will allocate a quarter of new borrowers' loans to smaller, not-for-profit loan servicers. The move will result in less business for the four companies that have traditionally dominated federal student loan services: Navient, Nelnet Inc., Great Lakes Higher Education Corp. & Affiliates, and Pennsylvania Higher Education Assistance Agency. Tarkan, the Compass Point analyst, estimates that while Navient will receive more fees per borrower, the company is likely to be granted fewer loans in future years. He expects a "relatively muted" impact on the company's earnings.

13 сентября 2014, 00:10

Education Department Sends More Student Borrowers To Firm Just Penalized By DOJ

The Education Department has rewarded a former Sallie Mae unit with more taxpayer-provided business even after the loan servicer, now known as Navient Corp., was accused by federal prosecutors in May of intentionally cheating troops on their federal student loans. The official announcement late Thursday, of a decision previously reported by The Huffington Post, also comes despite the Education Department's own pending probe into evidence amassed by the Justice Department that Sallie Mae and Navient overcharged some 60,000 troops by tens of millions of dollars. The results of that probe likely will be made public this month, the Education Department has said. The two companies settled the federal prosecutors' allegations without admitting or denying wrongdoing. Education Secretary Arne Duncan said in May that his department would further investigate their conduct with "no presumption of guilt or innocence." Navient was spun out from Sallie Mae earlier this year. The Education Department, which annually pays loan servicing companies hundreds of millions of dollars to interact with borrowers and collect their monthly payments, said late Thursday that Navient had improved its standing relative to the department's three other major loan servicers. An analyst who follows Navient on behalf of investors said the department will likely place about 30 percent more loans with the company than it did last year. "It sends a clear message to borrowers: If you misstep, there are consequences. If your servicer missteps, they're let off the hook and rewarded," said Chris Hicks, who leads the Debt-Free Future campaign for the Washington-based nonprofit Jobs With Justice. "For Navient, the message is clear: You're taken care of. We will not discipline you." According to the Education Department's data, Navient finished in third place among the current major loan servicers, based on default statistics and customer satisfaction surveys, and won the right to collect payments on the new loans that will be held by 24 percent of college students taking out federal debt this academic year. The company had the lowest share of borrowers in default. It also had a higher-than-average share of borrowers enrolled in repayment plans that cap monthly payments based on borrowers' earnings. "On behalf of customers and taxpayers alike, we’re proud of our consistent track record of helping more student loan borrowers succeed,” Jack Remondi, Navient's chief executive, said in a statement. Navient had finished last in each of the previous two years. This year's ranking should translate into more than 700,000 new borrowers for the company, according to Michael Tarkan, an analyst at the Washington financial firm Compass Point Research & Trading. That represents a roughly 30 percent increase from last year, when Navient's then-parent, Sallie Mae, won the right to collect payments from 558,000 new borrowers. The company currently services loans on the Education Department's behalf for a total of 5.8 million borrowers. The department's latest move, announced on an obscure government website, is likely to provoke criticism from some congressional Democrats, organized labor, student groups and borrower advocates. Representatives from each of those four groups had previously called on the department to either suspend Navient's ability to receive new taxpayer-provided business, terminate its contract or launch a comprehensive investigation into claims the company harms borrowers. "There is little to no oversight by the Education Department, and when problems are found they're not being addressed," Hicks said. Regarding its handling of federal student loans for the troops, Navient claims that it only followed the Education Department's directions. "The eligibility for the [servicemember] benefit was set forth by Congress with confirming guidance from the Department of Education, which Navient followed," Patricia Christel, a Navient spokeswoman, said in an emailed statement. "The company settled to put this matter behind us while noting there was no determination of a violation of law or rule. Navient did not, nor has it ever, deliberately taken advantage of its military customers and has always worked to ensure they receive the benefits they deserve." In May, Attorney General Eric Holder, with Education Secretary Arne Duncan by his side, announced the Justice Department's settlement with Navient and Sallie Mae. Holder said the practice of preventing troops from reducing the interest rates on their federal and private student loans in violation of the Servicemembers Civil Relief Act "appears to have been the rule, rather than the exception," at the companies. The alleged overcharging of borrowers began in 2005, according to the Justice Department, and it "was intentional, willful, and taken in disregard for the rights of servicemembers.” Duncan called the allegations "troubling." Navient has previously said it was penalized for not complying with what the company described as new interpretations of existing law. Remondi, the company's chief executive, said in May, “We offer our sincere apologies to the servicemen and servicewomen who were affected by our processing errors and thus did not receive the full benefits they deserve." Dorie Nolt, an Education Department spokeswoman, and Education Under Secretary Ted Mitchell, who oversees the Office of Federal Student Aid, did not respond to messages seeking comment. FSA is responsible for the federal student loan system. In addition to the new borrowers already awarded, Navient is also a finalist for a separate Education Department contract that could be worth up to $1 billion over the next decade. It was selected as a finalist for the lucrative contract two weeks after its settlement with the Justice Department. President Barack Obama, who has presided over a near doubling of unpaid federal student debt, directed the Education Department in June to rework its loan servicing contracts with companies such as Navient after months of criticism regarding their lackluster customer service and inability to stem the rising tide of loan defaults. Even the Treasury Department has publicly challenged the Education Department and its contractors over how they handle borrowers struggling with student debt. Last month, the department announced it had renegotiated its contracts. On Wednesday, William Leith, chief business officer at FSA, testified before a Senate committee that the department would end up paying its loan servicers "a little bit more" money as a result -- even if their performance doesn't improve. Sen. Elizabeth Warren (D-Mass.), who has heavily criticized the Education Department's oversight of Navient and Sallie Mae, was not pleased. "Let me get this straight: You break the law. You don't follow the rules. You treat the borrowers badly," Warren said of the loan servicers. "And you all just renegotiated the contracts to make sure that across the portfolio [loan servicers] are going to make a little more money if nothing changes?" The new contracts specify that companies such as Navient will receive more money if they keep borrowers current on their loans and less if the borrowers fall behind or postpone payments. The goal, according to the Education Department, is to incentivize servicers to keep borrowers in good standing. Separately, beginning next year, the Education Department will allocate a quarter of new borrowers' loans to smaller, not-for-profit loan servicers. The move will result in less business for the four companies that have traditionally dominated federal student loan services: Navient, Nelnet Inc., Great Lakes Higher Education Corp. & Affiliates, and Pennsylvania Higher Education Assistance Agency. Tarkan, the Compass Point analyst, estimates that while Navient will receive more fees per borrower, the company is likely to be granted fewer loans in future years. He expects a "relatively muted" impact on the company's earnings.

Выбор редакции
08 августа 2014, 01:20

Nelnet beats by $0.07

Nelnet (NYSE:NNI): Q2 EPS of $1.51 beats by $0.07.Press Release Post your comment!

Выбор редакции
13 мая 2014, 20:10

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 and other borrowers on their 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. The increase in the expected cost -- which could grow by the time the expected settlements are finalized -- comes as the Department of Education faces pressure from Senate Democrats and student advocates to suspend or terminate its loan servicing contract with Sallie Mae's former loan servicing unit, now known as Navient, for its alleged lawbreaking. Meanwhile, Sallie Mae's bank is contending with the possibility that federal bank regulators may require it to suspend its dealings with Navient. The disclosures regarding the updated settlement costs were contained in documents the two companies filed late Friday with the Securities and Exchange Commission. Companies and government agencies typically make public embarrassing information on Friday afternoons to avoid scrutiny. Navient acknowledged that the federal government's investigation into allegations the company cheated active-duty troops in violation of the Servicemembers Civil Relief Act covers "all loans" it serviced from Nov. 28, 2005 until now. The company services loans on behalf of the Education Department, and its contract with the government forbids it from breaking the law. James Runcie, chief operating officer for the Education Department's Office of Federal Student Aid, told senators in March that the department hadn't found a "wholesale" violation by the company of its contract. Sallie Mae, the nation's largest student loan company, in recent weeks split into two businesses, Navient, focused on collecting loan payments and recouping money from borrowers who default, and a bank focused on making new private student loans. In January, it had pegged the total anticipated cost of the settlements at $70 million. Pending probes from the Consumer Financial Protection Bureau were not included in the tally of anticipated costs, an indication that the watchdog agency does not intend to join settlements being negotiated by the Department of Justice, Federal Deposit Insurance Corp., and the Education Department. Sallie Mae and Navient will almost certainly have to pay costs associated with the CFPB investigations to get in the government's good graces as well. Sallie Mae said Navient would pick up most of the tab. Last month, in two separate news stories, The Huffington Post reported that federal investigators had found evidence that Sallie Mae violated the service members law in the company's handling of requests from troops with federal student loans, and had made the discoveries at least two months prior to when the Education Department told the company it intended to renew its lucrative servicing contract. The federal government has not publicly accused Sallie Mae or Navient of wrongdoing in connection with the pending investigations. Representatives for the Education Department, Justice Department, FDIC, and CFPB either declined to comment or did not respond to requests for comment. Because the service members probe focuses in part on federal student loans, Sallie Mae and Navient have been under fire for potentially violating the Education Department contract. "We have always sought to administer SCRA benefits in accordance with the law's requirements and in a manner that helps eligible customers receive their benefits quickly and easily," said Sallie Mae spokeswoman Martha Holler. "We strongly support our military customers and we make it as easy as possible for service members to get the information and service they need to access their SCRA benefits," said Navient spokeswoman Patricia Christel. "The majority of our dedicated military benefits team has a loved one who has served, and they are proud to assist thousands of service members each month. We look forward to resolving discussions with our regulators very soon." The loan servicing contract, now held by Navient, requires the company to comply with all relevant federal and state laws at all times. The Education Department could terminate the contract if the company violates its terms, Education Department officials have said. Sen. Patty Murray (D-Wash.) and Sen. Elizabeth Warren (D-Mass.) are among a group of federal lawmakers pushing the Education Department to crack down on Navient for its alleged wrongdoing. The American Association of State Colleges and Universities, the American Federation of Teachers, the National Education Association and the United States Student Association, among others, have called on Education Secretary Arne Duncan to suspend the department's contract with Sallie Mae. In a December letter to Duncan, the groups said that student borrowers can't expect to enjoy the basic consumer protections provided to millions of Americans who take out loans because the Education Department fails to hold its loan servicers accountable. Sallie Mae and Navient said the alleged wrongdoing covers conduct going back to November 2005, which is when Sallie Mae established a bank regulated by the FDIC. Sallie Mae Bank already is subject to a 2008 order from the FDIC prohibiting it from breaking the law. In that order, the FDIC faulted the bank for "inadequate oversight" of its relationships with affiliates and other service providers that interact with customers on the bank's behalf, and for engaging in "deceptive" practices that violated the Federal Trade Commission Act. At the time, Sallie Mae Bank neither admitted nor denied the allegations. Sallie Mae Bank is now in the FDIC's crosshairs because of the way the parent company's servicing unit, now known as Navient, serviced its loans. Navient said it had earmarked $30 million to be made available to borrowers charged with certain late fees for loans owned or originated by Sallie Mae Bank. It added that it had "voluntarily" set aside $42 million to refund borrowers whose loans were neither owned nor originated by Sallie Mae Bank to ensure all borrowers are treated similarly. Because Sallie Mae Bank was previously faulted for its oversight of its vendors, a category Navient now falls into as a result of its spin-off from Sallie Mae, the bank now faces the possibility that the FDIC may prohibit it from using Navient to service its student loans. In the wake of the foreclosure crisis, which spawned illegal practices such as so-called "robosigning," bank regulators have cracked down on banks for faulty oversight of their vendors. "Financial institutions are solely responsible to regulators for vendors' actions to the same extent as if the actions were taken by the institutions themselves," lawyers at Pepper Hamilton LLP, a law firm that advises banks, said last year. Allegations that Sallie Mae and Navient violated service members' consumer rights have touched a nerve in Washington, where lawmakers often attempt to highlight their support for America's troops. Warren and Sen. Sherrod Brown (D-Ohio) have long been critical of the quality of student loan servicing, but Murray and Sen. Tom Harkin (D-Iowa) only recently began criticizing Sallie Mae over its servicing practices. Under the Servicemembers Civil Relief Act, loan companies must reduce the interest rate on student loans to no more than 6 percent upon request by active duty troops. The law extended beyond private student loans to include federal student loans beginning in 2008. The Justice Department only began vigorously enforcing the law in the past few years. Student loan companies have had a difficult time complying with it. The law states that once a service member requests the interest-rate cap, it's in effect for the duration of active-duty status. Troops don't have to be in combat zones to qualify for the benefit. According to the CFPB, service members have complained that companies such as Sallie Mae and Navient have told them they could not receive protections under the law unless their loans were in forbearance or deferment. Troops also have told the CFPB that their servicers wrongly told them the 6 percent interest-rate cap expired annually, and they were required to submit additional paperwork to retain it. Others were discouraged from applying for the protections contained in the service members law, while some were mistakenly told that the benefits are only available to those in combat zones. Some service members told the CFPB that they were told to provide end dates for their tours on active duty, a requirement the CFPB has said is virtually impossible to meet, since members of the armed forces are usually not told when their tours will end. Last year, Rohit Chopra, the consumer bureau's top student loan expert, told the Senate that companies that fail to comply with the service members law may be cheating borrowers in other ways. "Admittedly, military families are a small segment of the population," Chopra said. "But if a servicer is unable to provide adequate service to those who have special protections under the law, it raises questions about whether it is agile enough to deal with the complexities of the larger population of borrowers facing hardship." Thus far, Sallie Mae and Navient are the only companies to disclose that they're under investigation for allegedly violating the service members law when it comes to student loans. Nelnet Inc., a publicly-traded student loan specialist that also has a contract with the Education Department, is not under investigation for harming service members, said Nelnet spokesman Ben Kiser. In its securities filings, Navient appeared to blame the federal government for its alleged law-breaking. A potential settlement with authorities would penalize the company for not complying with what it described as the DOJ's "new approach" to the service members law, Navient said. This new approach would be retroactively applied to November 2005, and the company would pay the federal government penalties based on that. A June 2011 letter from the Education Department to Washington trade groups representing student loan companies helps to illustrate Navient's position. Service members wishing to have the interest-rate cap applied to their loans had to provide a copy of their military orders when requesting the benefit. But in the letter, which served as a response to questions from the industry over how best to comply with the service members law, Pamela Moran of the department's Office of Postsecondary Education made clear that service members had to provide the end dates of their active-duty tours when requesting benefits, and that they had to specifically ask for the interest-rate benefit. Vague requests needn't be honored. The Huffington Post asked the Education Department whether it had consulted with the Defense or Justice departments in drafting the June 2011 letter, and whether the department intended to disqualify officers, whose orders typically don't have end dates. The Education Department did not respond to multiple requests for comment, nor did it confirm the authenticity of Moran's letter. A 2012 settlement between the Justice Department and credit card specialist Capital One suggests the Justice Department treats the service members law differently than the Education Department does. As part of the settlement, federal prosecutors required Capital One to check a Defense Department database whenever it's unclear that a service member is on active duty. The Justice Department also required Capital One to only seek out military orders that identify the start of a borrower's active-duty service. The company was forbidden from requiring military orders that specified end dates. "With or without an end date, our policy has always been to process the 6 percent SCRA interest rate reduction benefit," said Christel, the Navient spokeswoman. "If the orders do not have an end date, our policy is to process the 6 percent SCRA interest rate reduction benefit for a period of one year, and then automatically extend beyond the year-long period after checking the Department of Defense military personnel database." Christel said the company never required annual certifications from service members. Navient also never discouraged service members from utilizing the protections available to them under the service members law, she said. A settlement resolving the service members' allegations would need to be approved by the Education Department, Navient said. The company added that it would be required to establish a $60 million fund to compensate aggrieved troops.

Выбор редакции
13 мая 2014, 20:10

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 and other borrowers on their 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. The increase in the expected cost -- which could grow by the time the expected settlements are finalized -- comes as the Department of Education faces pressure from Senate Democrats and student advocates to suspend or terminate its loan servicing contract with Sallie Mae's former loan servicing unit, now known as Navient, for its alleged lawbreaking. Meanwhile, Sallie Mae's bank is contending with the possibility that federal bank regulators may require it to suspend its dealings with Navient. The disclosures regarding the updated settlement costs were contained in documents the two companies filed late Friday with the Securities and Exchange Commission. Companies and government agencies typically make public embarrassing information on Friday afternoons to avoid scrutiny. Navient acknowledged that the federal government's investigation into allegations the company cheated active-duty troops in violation of the Servicemembers Civil Relief Act covers "all loans" it serviced from Nov. 28, 2005 until now. The company services loans on behalf of the Education Department, and its contract with the government forbids it from breaking the law. James Runcie, chief operating officer for the Education Department's Office of Federal Student Aid, told senators in March that the department hadn't found a "wholesale" violation by the company of its contract. Sallie Mae, the nation's largest student loan company, in recent weeks split into two businesses, Navient, focused on collecting loan payments and recouping money from borrowers who default, and a bank focused on making new private student loans. In January, it had pegged the total anticipated cost of the settlements at $70 million. Pending probes from the Consumer Financial Protection Bureau were not included in the tally of anticipated costs, an indication that the watchdog agency does not intend to join settlements being negotiated by the Department of Justice, Federal Deposit Insurance Corp., and the Education Department. Sallie Mae and Navient will almost certainly have to pay costs associated with the CFPB investigations to get in the government's good graces as well. Sallie Mae said Navient would pick up most of the tab. Last month, in two separate news stories, The Huffington Post reported that federal investigators had found evidence that Sallie Mae violated the service members law in the company's handling of requests from troops with federal student loans, and had made the discoveries at least two months prior to when the Education Department told the company it intended to renew its lucrative servicing contract. The federal government has not publicly accused Sallie Mae or Navient of wrongdoing in connection with the pending investigations. Representatives for the Education Department, Justice Department, FDIC, and CFPB either declined to comment or did not respond to requests for comment. Because the service members probe focuses in part on federal student loans, Sallie Mae and Navient have been under fire for potentially violating the Education Department contract. "We have always sought to administer SCRA benefits in accordance with the law's requirements and in a manner that helps eligible customers receive their benefits quickly and easily," said Sallie Mae spokeswoman Martha Holler. "We strongly support our military customers and we make it as easy as possible for service members to get the information and service they need to access their SCRA benefits," said Navient spokeswoman Patricia Christel. "The majority of our dedicated military benefits team has a loved one who has served, and they are proud to assist thousands of service members each month. We look forward to resolving discussions with our regulators very soon." The loan servicing contract, now held by Navient, requires the company to comply with all relevant federal and state laws at all times. The Education Department could terminate the contract if the company violates its terms, Education Department officials have said. Sen. Patty Murray (D-Wash.) and Sen. Elizabeth Warren (D-Mass.) are among a group of federal lawmakers pushing the Education Department to crack down on Navient for its alleged wrongdoing. The American Association of State Colleges and Universities, the American Federation of Teachers, the National Education Association and the United States Student Association, among others, have called on Education Secretary Arne Duncan to suspend the department's contract with Sallie Mae. In a December letter to Duncan, the groups said that student borrowers can't expect to enjoy the basic consumer protections provided to millions of Americans who take out loans because the Education Department fails to hold its loan servicers accountable. Sallie Mae and Navient said the alleged wrongdoing covers conduct going back to November 2005, which is when Sallie Mae established a bank regulated by the FDIC. Sallie Mae Bank already is subject to a 2008 order from the FDIC prohibiting it from breaking the law. In that order, the FDIC faulted the bank for "inadequate oversight" of its relationships with affiliates and other service providers that interact with customers on the bank's behalf, and for engaging in "deceptive" practices that violated the Federal Trade Commission Act. At the time, Sallie Mae Bank neither admitted nor denied the allegations. Sallie Mae Bank is now in the FDIC's crosshairs because of the way the parent company's servicing unit, now known as Navient, serviced its loans. Navient said it had earmarked $30 million to be made available to borrowers charged with certain late fees for loans owned or originated by Sallie Mae Bank. It added that it had "voluntarily" set aside $42 million to refund borrowers whose loans were neither owned nor originated by Sallie Mae Bank to ensure all borrowers are treated similarly. Because Sallie Mae Bank was previously faulted for its oversight of its vendors, a category Navient now falls into as a result of its spin-off from Sallie Mae, the bank now faces the possibility that the FDIC may prohibit it from using Navient to service its student loans. In the wake of the foreclosure crisis, which spawned illegal practices such as so-called "robosigning," bank regulators have cracked down on banks for faulty oversight of their vendors. "Financial institutions are solely responsible to regulators for vendors' actions to the same extent as if the actions were taken by the institutions themselves," lawyers at Pepper Hamilton LLP, a law firm that advises banks, said last year. Allegations that Sallie Mae and Navient violated service members' consumer rights have touched a nerve in Washington, where lawmakers often attempt to highlight their support for America's troops. Warren and Sen. Sherrod Brown (D-Ohio) have long been critical of the quality of student loan servicing, but Murray and Sen. Tom Harkin (D-Iowa) only recently began criticizing Sallie Mae over its servicing practices. Under the Servicemembers Civil Relief Act, loan companies must reduce the interest rate on student loans to no more than 6 percent upon request by active duty troops. The law extended beyond private student loans to include federal student loans beginning in 2008. The Justice Department only began vigorously enforcing the law in the past few years. Student loan companies have had a difficult time complying with it. The law states that once a service member requests the interest-rate cap, it's in effect for the duration of active-duty status. Troops don't have to be in combat zones to qualify for the benefit. According to the CFPB, service members have complained that companies such as Sallie Mae and Navient have told them they could not receive protections under the law unless their loans were in forbearance or deferment. Troops also have told the CFPB that their servicers wrongly told them the 6 percent interest-rate cap expired annually, and they were required to submit additional paperwork to retain it. Others were discouraged from applying for the protections contained in the service members law, while some were mistakenly told that the benefits are only available to those in combat zones. Some service members told the CFPB that they were told to provide end dates for their tours on active duty, a requirement the CFPB has said is virtually impossible to meet, since members of the armed forces are usually not told when their tours will end. Last year, Rohit Chopra, the consumer bureau's top student loan expert, told the Senate that companies that fail to comply with the service members law may be cheating borrowers in other ways. "Admittedly, military families are a small segment of the population," Chopra said. "But if a servicer is unable to provide adequate service to those who have special protections under the law, it raises questions about whether it is agile enough to deal with the complexities of the larger population of borrowers facing hardship." Thus far, Sallie Mae and Navient are the only companies to disclose that they're under investigation for allegedly violating the service members law when it comes to student loans. Nelnet Inc., a publicly-traded student loan specialist that also has a contract with the Education Department, is not under investigation for harming service members, said Nelnet spokesman Ben Kiser. In its securities filings, Navient appeared to blame the federal government for its alleged law-breaking. A potential settlement with authorities would penalize the company for not complying with what it described as the DOJ's "new approach" to the service members law, Navient said. This new approach would be retroactively applied to November 2005, and the company would pay the federal government penalties based on that. A June 2011 letter from the Education Department to Washington trade groups representing student loan companies helps to illustrate Navient's position. Service members wishing to have the interest-rate cap applied to their loans had to provide a copy of their military orders when requesting the benefit. But in the letter, which served as a response to questions from the industry over how best to comply with the service members law, Pamela Moran of the department's Office of Postsecondary Education made clear that service members had to provide the end dates of their active-duty tours when requesting benefits, and that they had to specifically ask for the interest-rate benefit. Vague requests needn't be honored. The Huffington Post asked the Education Department whether it had consulted with the Defense or Justice departments in drafting the June 2011 letter, and whether the department intended to disqualify officers, whose orders typically don't have end dates. The Education Department did not respond to multiple requests for comment, nor did it confirm the authenticity of Moran's letter. A 2012 settlement between the Justice Department and credit card specialist Capital One suggests the Justice Department treats the service members law differently than the Education Department does. As part of the settlement, federal prosecutors required Capital One to check a Defense Department database whenever it's unclear that a service member is on active duty. The Justice Department also required Capital One to only seek out military orders that identify the start of a borrower's active-duty service. The company was forbidden from requiring military orders that specified end dates. "With or without an end date, our policy has always been to process the 6 percent SCRA interest rate reduction benefit," said Christel, the Navient spokeswoman. "If the orders do not have an end date, our policy is to process the 6 percent SCRA interest rate reduction benefit for a period of one year, and then automatically extend beyond the year-long period after checking the Department of Defense military personnel database." Christel said the company never required annual certifications from service members. Navient also never discouraged service members from utilizing the protections available to them under the service members law, she said. A settlement resolving the service members' allegations would need to be approved by the Education Department, Navient said. The company added that it would be required to establish a $60 million fund to compensate aggrieved troops.

Выбор редакции
09 мая 2014, 01:00

Nelnet beats by $0.09

Nelnet (NNI): Q1 EPS of $1.56 beats by $0.09.Press Release Post your comment!

28 марта 2014, 02:31

Elizabeth Warren Grills Obama Administration On Sallie Mae Contract Renewal

 By Elvina Nawaguna WASHINGTON, March 27 (Reuters) - U.S. lawmakers on Thursday grilled an Obama administration official on the government's decision to renew a contract with student loan servicing company SLM Corp, the subject of numerous government investigations. Massachusetts Democratic Senator Elizabeth Warren said during the hearing, before the Senate Committee on Health, Education, Labor and Pensions, that the company had violated consumer protection laws but not held accountable. "Sallie Mae has repeatedly broken the rules and violated its contracts with the government, and yet Sallie Mae continues to make millions on its federal contracts with the Department of Education," Warren said of SLM, popularly known as Sallie Mae. Sallie Mae did not have any representatives at the hearing. Committee Chairman Tom Harkin, an Iowa Democrat, said the company and other servicers had turned down invitations to testify. Sallie Mae, the largest U.S. student loan provider, serviced 5.7 million student loan accounts on behalf of the U.S. Department of Education as of December 2013, according to a company spokeswoman. The Education Department said it paid the company $87.1 million in the fiscal year that ended Sept. 30. Sallie Mae is facing probes by the Department of Justice, the Federal Deposit Insurance Corporation, the Consumer Financial Protection Bureau, and a number of states, including Utah and Illinois. The company6, which services federal and private student loans, has been accused of violations that include improper marketing, unfair targeting of military veterans, high fees and improper account handling. James Runcie, chief operating officer of the Education Department's federal student aid program, said the department decided to renew Sallie Mae's and other servicers' contracts to avoid displacing more than 24 million student accounts. "In terms of extending the contract for Sallie Mae, it was part of extending the contracts for all of the TIVAs (student loan servicers)," Runcie told lawmakers. The Department of Education in October notified its four primary student loan servicers, Nelnet Inc, Great Lakes, Pennsylvania Higher Education Assistance Agency (PHEAA) and Sallie Mae, that it planned to renew their contracts for five years when current agreements expire in June. The department strictly monitors its servicers and would act if it saw evidence of malfeasance, Runcie said. In regulatory filings, Sallie Mae said it had set aside $70 million to cover costs arising from any enforcement actions. Last year, the CFPB said that Sallie Mae was the subject of nearly half of the 3,800 student lending complaints made to the agency for the 12-month period starting October 2012. The CFPB ranked the company worst in borrower, school, and federal personnel satisfaction in a report rating student loan servicers. Warren, who has taken an aggressive stance against big educational lenders, said the Education Department was not doing enough to hold Sallie Mae accountable and to prevent it from repeating the violations it has been accused of. "I'm very concerned about reupping a contract with Sallie Mae, when Sallie Mae has demonstrated time and time again that it hasn't followed the rules," she said. (Reporting by Elvina Nawaguna; Editing by Steve Orlofsky)

28 марта 2014, 02:31

Elizabeth Warren Grills Obama Administration On Sallie Mae Contract Renewal

 (Adds comment by Sallie Mae spokeswoman) By Elvina Nawaguna WASHINGTON, March 27 (Reuters) - U.S. lawmakers on Thursday grilled an Obama administration official on the government's decision to renew a contract with student loan servicing company SLM Corp, the subject of numerous government investigations. Massachusetts Democratic Senator Elizabeth Warren said during the hearing, before the Senate Committee on Health, Education, Labor and Pensions, that the company had violated consumer protection laws but not held accountable. "Sallie Mae has repeatedly broken the rules and violated its contracts with the government, and yet Sallie Mae continues to make millions on its federal contracts with the Department of Education," Warren said of SLM, popularly known as Sallie Mae. A spokeswoman for Sallie Mae, Patricia Christel, commented in an email to Reuters: "Americans with federal loans serviced by Sallie Mae are 30 percent less likely to default than others. Sallie Mae-serviced customers enjoy a higher rate of repayment success due to the company's top default prevention performance in the direct loan contract." The company did not have any representatives at the hearing. Committee Chairman Tom Harkin, an Iowa Democrat, said the company and other servicers had turned down invitations to testify. Sallie Mae, the largest U.S. student loan provider, serviced 5.7 million student loan accounts on behalf of the U.S. Department of Education as of December 2013, according to a company spokeswoman. The Education Department said it paid the company $87.1 million in the fiscal year that ended Sept. 30. Sallie Mae is facing probes by the Department of Justice, the Federal Deposit Insurance Corporation, the Consumer Financial Protection Bureau, and a number of states, including Utah and Illinois. The company6, which services federal and private student loans, has been accused of violations that include improper marketing, unfair targeting of military veterans, high fees and improper account handling. James Runcie, chief operating officer of the Education Department's federal student aid program, said the department decided to renew Sallie Mae's and other servicers' contracts to avoid displacing more than 24 million student accounts. "In terms of extending the contract for Sallie Mae, it was part of extending the contracts for all of the TIVAs (student loan servicers)," Runcie told lawmakers. The Department of Education in October notified its four primary student loan servicers, Nelnet Inc, Great Lakes, Pennsylvania Higher Education Assistance Agency (PHEAA) and Sallie Mae, that it planned to renew their contracts for five years when current agreements expire in June. The department strictly monitors its servicers and would act if it saw evidence of malfeasance, Runcie said. In regulatory filings, Sallie Mae said it had set aside $70 million to cover costs arising from any enforcement actions. Last year, the CFPB said that Sallie Mae was the subject of nearly half of the 3,800 student lending complaints made to the agency for the 12-month period starting October 2012. The CFPB ranked the company worst in borrower, school, and federal personnel satisfaction in a report rating student loan servicers. Warren, who has taken an aggressive stance against big educational lenders, said the Education Department was not doing enough to hold Sallie Mae accountable and to prevent it from repeating the violations it has been accused of. "I'm very concerned about reupping a contract with Sallie Mae, when Sallie Mae has demonstrated time and time again that it hasn't followed the rules," she said. (Reporting by Elvina Nawaguna; Editing by Steve Orlofsky)

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18 марта 2014, 01:34

I'm Paying $0 per Month Towards My Student Loans

Huffington Post Reader Question  Dear Steve, I have $32,000.00 in school loans at 8% interest, incurred between 1985-1994. I obtained a bachelors and graduate degree during that time. I unwisely deferred these loans based on income/circumstances. My only positive is that I have never defaulted. I currently am on my second year of the IBR plan as my income is dreadful. My repayment is $0 due to this low income. Nelnet is the servicer on my loan. I am overwhelmed and unsure what option I should take. Do I continue with IBR? Does the computed $0/month payment qualify to be put towards the 25 year repayment where balance will be forgiven? If not, what other plan should I consider? I just do not know what to do. Please advise. Michelle Don't miss my free my weekday email newsletter with the latest tips and advice on how to beat debt and do better financially. Subscribe now. - Click Here Dear Michelle, It does not sound like you are disabled or work for a non-profit or in some other form of public service. But it's worth checking the qualifying fields here. Outside of that it sounds like the Income Based Repayment (IBR) program makes sense for you. Under the current program you need to make 25 years of payments and you've already made two at the $0 per month level. Keep it up because they do count. The only gotcha I see right now is to absolutely make sure you don't miss your annual IBR recertification form. If you miss sending that in your loan will reset to the ten year repayment amount which you can't afford. I'd set up some sort of reminder for ten months after your IBR last renewed so you absolutely get a jump on this. Steve Get Out of Debt Guy - Twitter, G+, Facebook If you have a credit or debt question you'd like to ask, just click here and ask away. If you'd like to stay posted on all the latest get out of debt news and scam alerts, subscribe to my free newsletter.

12 марта 2014, 22:04

Student Loan Borrowers Win As Education Department Reverses Course

Borrowers with federal student loans may now access the U.S. government's latest rankings of loan specialists after the Department of Education on Tuesday abruptly reversed its temporary ban on providing customer service scores. Among the department's four major loan servicers, SLM Corp., the nation's largest student loan company (better known as Sallie Mae), finished or tied for last in the three customer satisfaction surveys for the three-month period ending Sept. 30. Respondents to the surveys included school personnel, Education Department employees and borrowers. The company also placed last for the year ending June 30. Nelnet Inc., the Nebraska-based student loan specialist, recorded the fewest borrowers and loan amounts entering default. The quarterly rankings, which combine survey results with data on loan defaults, are closely watched by Wall Street and others, as they determine how much new business the Education Department will send annually to loan servicers such as Sallie Mae. Borrowers and consumer advocates keep tabs on the rankings to measure how well loan specialists are treating households whose debt payments they collect. Policymakers outside the Education Department also use the scores as part of their efforts to improve servicing of federal student debt, which is now carried by some 40 million Americans who collectively owe $1.1 trillion. Despite the surveys' importance, the Education Department had stopped providing the scores to the public after the last quarterly release in August. The move coincided with a separate department initiative that for the first time allowed some borrowers to pick which company would handle their federal student loans. The Huffington Post detailed the department's moves in a Feb. 20 report. The lack of public disclosure made it all but impossible to judge how companies such as Sallie Mae were handling taxpayer-backed student debt, and which company may be best placed to serve borrowers. At the time, the department said it wanted to keep the rankings confidential as it privately assessed how its loan servicers were coping with an influx of new accounts. Consumer advocates dismissed the department's rationale as nonsense, citing the fact that such reasoning had not stopped the department from publicly releasing rankings in previous quarters, and criticized the department for making it harder for borrowers to shop around for the best loan servicer. Last week Deanne Loonin, director of the National Consumer Law Center's Student Loan Borrower Assistance Project, sent a letter to the Office of Federal Student Aid's chief operating officer James Runcie to express her concerns that borrowers may not have enough information to pick their own servicer as a result of the department's actions. "This is particularly critical since once they make a choice, as far as we know, the department will not let borrowers switch to a different servicer," Loonin wrote. For a department under fire from student advocates over its allegedly lackluster efforts to supervise student loan servicers, the move to reduce disclosure was viewed by some consumer groups and other higher education experts as an attempt to shield companies such as Sallie Mae from additional scrutiny. Barmak Nassirian, director of federal relations and policy analysis for the American Association of State Colleges and Universities, said last month that the Education Department was not "sufficiently focused on its primary clients: students." Sallie Mae, among the department's biggest contractors and the former employer of many of the department's employees, faces investigations into allegedly anti-borrower practices from the Department of Justice, Federal Deposit Insurance Corp., Consumer Financial Protection Bureau and about a half-dozen state attorneys general. The Education Department recently told Sallie Mae it intends to renew its lucrative federal contract, drawing criticism from groups representing students, teachers and public colleges. Chris Greene, an Education Department spokesman, said last month that servicer scores would not be publicly released until late April or early May. On Wednesday, when pressed as to why the rankings were posted this week, he said, "I guess they were ready earlier than we originally anticipated." It's unclear when rankings for the quarter ending Dec. 31 will be publicly released. Last year, results for that period were posted online in April. In 2012, they were released publicly in February. Results for the quarter ending Sept. 30 indicate that Sallie Mae would finish last among the Education Department's four major servicers if the scores represented annual figures, according to Michael Tarkan, a Compass Point Research & Trading senior vice president who recommends investors buy Sallie Mae stock. The company would receive just 19 percent of the batch of new loans the Education Department annually allocates to the four companies. Nelnet, by comparison, would finish first and receive 31 percent. Representatives for Sallie Mae did not respond to requests for comment.

12 марта 2014, 22:04

Student Loan Borrowers Win As Education Department Reverses Course

Borrowers with federal student loans may now access the U.S. government's latest rankings of loan specialists after the Department of Education on Tuesday abruptly reversed its temporary ban on providing customer service scores. Among the department's four major loan servicers, SLM Corp., the nation's largest student loan company (better known as Sallie Mae), finished or tied for last in the three customer satisfaction surveys for the three-month period ending Sept. 30. Respondents to the surveys included school personnel, Education Department employees and borrowers. The company also placed last for the year ending June 30. Nelnet Inc., the Nebraska-based student loan specialist, recorded the fewest borrowers and loan amounts entering default. The quarterly rankings, which combine survey results with data on loan defaults, are closely watched by Wall Street and others, as they determine how much new business the Education Department will send annually to loan servicers such as Sallie Mae. Borrowers and consumer advocates keep tabs on the rankings to measure how well loan specialists are treating households whose debt payments they collect. Policymakers outside the Education Department also use the scores as part of their efforts to improve servicing of federal student debt, which is now carried by some 40 million Americans who collectively owe $1.1 trillion. Despite the surveys' importance, the Education Department had stopped providing the scores to the public after the last quarterly release in August. The move coincided with a separate department initiative that for the first time allowed some borrowers to pick which company would handle their federal student loans. The Huffington Post detailed the department's moves in a Feb. 20 report. The lack of public disclosure made it all but impossible to judge how companies such as Sallie Mae were handling taxpayer-backed student debt, and which company may be best placed to serve borrowers. At the time, the department said it wanted to keep the rankings confidential as it privately assessed how its loan servicers were coping with an influx of new accounts. Consumer advocates dismissed the department's rationale as nonsense, citing the fact that such reasoning had not stopped the department from publicly releasing rankings in previous quarters, and criticized the department for making it harder for borrowers to shop around for the best loan servicer. Last week Deanne Loonin, director of the National Consumer Law Center's Student Loan Borrower Assistance Project, sent a letter to the Office of Federal Student Aid's chief operating officer James Runcie to express her concerns that borrowers may not have enough information to pick their own servicer as a result of the department's actions. "This is particularly critical since once they make a choice, as far as we know, the department will not let borrowers switch to a different servicer," Loonin wrote. For a department under fire from student advocates over its allegedly lackluster efforts to supervise student loan servicers, the move to reduce disclosure was viewed by some consumer groups and other higher education experts as an attempt to shield companies such as Sallie Mae from additional scrutiny. Barmak Nassirian, director of federal relations and policy analysis for the American Association of State Colleges and Universities, said last month that the Education Department was not "sufficiently focused on its primary clients: students." Sallie Mae, among the department's biggest contractors and the former employer of many of the department's employees, faces investigations into allegedly anti-borrower practices from the Department of Justice, Federal Deposit Insurance Corp., Consumer Financial Protection Bureau and about a half-dozen state attorneys general. The Education Department recently told Sallie Mae it intends to renew its lucrative federal contract, drawing criticism from groups representing students, teachers and public colleges. Chris Greene, an Education Department spokesman, said last month that servicer scores would not be publicly released until late April or early May. On Wednesday, when pressed as to why the rankings were posted this week, he said, "I guess they were ready earlier than we originally anticipated." It's unclear when rankings for the quarter ending Dec. 31 will be publicly released. Last year, results for that period were posted online in April. In 2012, they were released publicly in February. Results for the quarter ending Sept. 30 indicate that Sallie Mae would finish last among the Education Department's four major servicers if the scores represented annual figures, according to Michael Tarkan, a Compass Point Research & Trading senior vice president who recommends investors buy Sallie Mae stock. The company would receive just 19 percent of the batch of new loans the Education Department annually allocates to the four companies. Nelnet, by comparison, would finish first and receive 31 percent. Representatives for Sallie Mae did not respond to requests for comment.

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28 февраля 2014, 01:52

Nelnet beats by $0.12

Nelnet (NNI): FQ4 EPS of $1.51 beats by $0.12. Press Release Post your comment!