Sallie Mae hit with civil rights lawsuit

It's been a bad start to the new year for college lending giant Sallie Mae.

Battered by investigations and financial woes in 2007, the company now faces a new challenge: angry minority students.

Tampa student Cathelyn Gregoire is one of two named plaintiffs in a possible class action lawsuit, accusing the company of "systemic discriminatory practices" in marketing student loans to minority applicants.

The suit, filed Dec. 17 in federal district court in Connecticut, alleges the company violated federal civil rights and lending laws by intentionally targeting higher-priced loans to students attending schools with high minority populations.

Martha Holler, a spokeswoman for Sallie Mae, said the company would vigorously defend itself against the "unfounded allegations in this baseless complaint."

But Christa Collins, the attorney going after Sallie Mae, is no rookie.

A managing partner in the Tampa firm of James, Hoyer, Newcomer and Smiljanich, she has made her reputation bringing down large companies accused of discriminatory practices. Last year she reached a national settlement with Allstate Insurance Co. over allegations of unfair pricing, and in 2002 she reached a $160-million settlement with MetLife Inc.

And Collins said she's got plenty of ammunition for her latest case.

"We've been contacted by hundreds of students or former students," she said.

In the lawsuit, Gregoire contends that her former school -- the International Academy of Design and Technology in Tampa -- applied on her behalf for a Sallie Mae private loan with a 7 percent interest rate in 2003 after she expressed interest in financial aid.

The lender denied her application following a credit review, but later urged her to reapply. In September 2003 it awarded her a $14,276 loan, "which she later found out contained a 6 percent supplemental fee" on top of the regular interest rate of 5.5 percent above prime rate, or 13.25 percent, according to the lawsuit. Her debt has since climbed to around $20,000.

But those terms were not disclosed to Gregoire until after the loan deal was consummated, the lawsuit said, claiming violations of the federal Equal Credit Opportunity Act and the Truth in Lending Act. It said Gregoire, an African-American, was charged higher rates and fees based on her race.

Another plaintiff, Sasha Rodriguez of Branford, Conn., said Sallie Mae is now charging 18.1 percent interest on two loans she took out to attend a New Hampshire college. At those rates, which she said were concealed by the lender, her initial debt of $19,500 climbed to more than $33,000.

Sallie Mae and other lenders had already been put on notice last summer that their marketing practices to some schools might constitute "redlining" -- charging higher rates based on race.

In testimony before Congress, New York Attorney General Andrew Cuomo said some lenders assign schools an interest rate range based on their overall loan default rate, and then assign specific rates to students based on their credit score.

Last year Cuomo led a spate of state and federal investigations into unethical or illegal lending practices at U.S. colleges.

Dozens of schools and lenders, including Sallie Mae, have signed on to a New York code of conduct and paid $13.7-million into a fund to educate students about financial aid. And last month Florida Attorney General Bill McCollum unveiled his own code, saying he would use it to push for higher lending standards here.

Sallie Mae, the nation's largest student lender, manages around $160-billion in student loans.

While much of its business revolves around federally-backed loans, the company recently said lower federal subsidies have prompted it to market its so-called private loans more aggressively. Those loans, around 17 percent of its portfolio according to the Wall Street Journal, are typically more expensive.

The company is also in court over the collapse of a $25-billion takeover effort by a group of investors including J.C. Flowers & Co., JPMorgan Chase and Bank of America.

That buyout fell apart last fall, a casualty of the increased Congressional scrutiny into federal student lending and the slumping credit market. But in October, Sallie Mae sued its would-be owners to collect a $900-million deal termination fee.

Tom Marshall, Times staff writer

Comments

[Romanes Despeines]

The unscrupulous lender practices is surcharged interest rates. I had consolidated my loans in 1998 with Direct Student loans. In 2006 SallieMae said that those loans belong to them and called days and nights.They sent me to collections for $46000. Because I cannot do any transaction on my name I forced to consolidated again in December 2006. Two months later, SallieMae asked me for $22000 more in interest. Please I need your help. I have all the documents. I can be reached at 305-610-4269 or email: dromanes@bellsouth.net

Truly
Romanes

[Romanes Despeines]

The unscrupulous lender practices is surcharged interest rates. I had consolidated my loans in 1998 with Direct Student loans. In 2006 SallieMae said that those loans belong to them and called days and nights.They sent me to collections for $46000. Because I cannot do any transaction on my name I forced to consolidated again in December 2006. Two months later, SallieMae asked me for $22000 more in interest. Please I need your help. I have all the documents. I can be reached at 305-610-4269 or email: dromanes@bellsouth.net

Truly
Romanes

[Lilian Nzurike]

I have a similar experience as Romanes. I graduated in 1997 with loans in the amount of 36,000, today the loan is almost $80,000 because of interest. I spoke to sallie mae who said that I had a variable interest rate that increase each year without them notifying me. Someone has to put a stop to this. I may be reached at 305-302-1427 or lcnwankwo2@yahoo.com.

Sincerely

Lilian Nzurike

[Ron]

I have a similar issue with Sallie Mae. Please help. I can be reached at elmeng2007@hotmail.com

Ron

[Deborah]

My loan is unpayable, too. I started out with a $30,000.00 loan. I have repaid $42,000.00 so far, and the balance NOW is $59,000.00. How can this be? Also, I overpay my "payment due" each month, and none goes toward principal. All goes to interest. Please help. deborahgoza@hotmail.com

Sounds like we need a mandatory college level family finance course!

[Janeen]

I got caught too! My loan was for 32K I've paid 22K. And now my loan is 81K. I'm in good standing with them. However, I cannot pay this loan! Help!!!!!!!!

hellojaneen@yahoo.com

Janeen

[MoreThanCanBeHandled]

The debt you guys have is nothing compared to mine!!! I graduated from a SUNY college and my ending loan balance upon graduation was $102,000. Now after only a year and a half, it's now way over $135,000. I am currently working on getting my federal loans consolidated, but don't know what to do with the private loans. If if were to pay my monthly required minimum payment towards interest, it would be $1350!!! I have tried to negotiate with Sallie Mae at least 7 times and they are unwilling to extend my payments over 30 years, adjust my payment to match my current income level, nor accept any adjustments to my private loans interest rate. I would even be willing to pay what I currently owe if Sallie Mae were to lower my rate on my private loans to match my Federal loans. Looks like my next step is to contact an outside advocacy group.

There are lots of programs to reduce the loans or discharge a portion through programs like public school teaching, counseling of low-income individuals, or providing child care to low-income families. But these programs are very hard to get into and even more scarce are getting accepted into these programs.

In a nutshell, Sallie Mae is gouging me with interest higher than a mortgage and in essence "enslaving" me financially for life. I could use some help!!!!

My goal; to calculate a legally reasonable percentage of my monthly income on student loan payments.

Multiple loans from Sallie Mae, supplemental security income, a permanently disabled co-signer, and was refused requests for possibilities on loan cancellation, deferments, and payment plans.

Sallie Mae has left me unclear, and unable to understand my entire current loan situation. Although, I have obtained informative documents on my account with Sallie Mae. Plus, billing statements, paperwork from my prior institute's financial department, and call logs.

Additionally, a request for a legal translator.

I appreciate your time.

I'm not a minority but I am female and I am totally baffled by my Sallie Mae statements. The total amount to pay is nearly 2/3 again more than the original amount of the loan with a 3.25% interest rate? I'm not a financial expert but this seems odd to me. Someone please offer advice! ilikegradschool@live.com

[confuerte]

If any of you are willing to enlist or become an officer in the military, you may be eligible for the Servicemembers Civil Relief Act (SCRA). Go on the depart. of defense website (www.dod.mil)and put in the acronym. All debt must be lowered to 6%, no matter what. I am really considering the possibility of enlisted. 1st)I am taking the officer test this month (the ASTB), then take it from there. Also, once in the military you can apply for the USAA loan (up to $20,000-www.usaa.com). Only federal employees are eligible for this loan.

I discovered this information from my research. The websites I went to are (www.usnavyocs.com;www.airwarriors.com;www.military.com;www.dod.mil;www.npc.navy.mil; I graduate in Dec. and don't want to fight this debt for the rest of my life.

[sasha noel]

i took out $32k and now its $54k.....i was up to date. but with the way the economy is cant seem to find a good paying job that will help me keep up w/ the $700/month payment and live at the same time.......you know they say the only way to get rid of the student loan is to pay it back or to die.........2nd option is looking better at this point of my life(just a joke)

send help.