By TAMAR LEWIN
Published, NY Times: February 2, 2012
On Thursday, three months after Bank of America backed down from imposing a $5 monthly debit card fee in response to an online Change.org petition that collected 300,000 signers, Sallie Mae, the nation’s largest private student-loan provider, changed its fee policy in response to an online petition.
For years, Sallie Mae had required unemployed people who could not afford their monthly payments to pay a $50-per-loan fee every three months to suspend their payments temporarily, even as interest charges mounted.
Sallie Mae called this forbearance fee a “good faith deposit” — but it was neither credited to the borrower’s account nor refunded.
Stef Gray, 23, a New Yorker who owes $600 a month on four loans, saw it as a predatory effort to squeeze blood from a generation of turnips — graduates already buried under a mountain of student debt. In November, she started a petition, “Tell Sallie Mae: Stop the Unemployment Penalty” with Change.org., a group based in San Francisco. “Sallie Mae is preying on people like me and cashing in on the fact that we need more time to find work before we can repay our student loans,” it said.
Ms. Gray, who has paid $300 to Sallie Mae in forbearance fees, had another $150 due for January. (Although she has four loans, she said, the top Sallie Mae fee is $150.) She did not pay the fee, and this week her loans became delinquent.
On Thursday morning, wearing a cap and gown and accompanied by Molly Katchpole, 22, the nanny who started the Bank of America petition, Ms. Gray visited the Washington offices of Sallie Mae to hold a news conference and deliver the petition, which had attracted 77,000 signatures.
Thursday afternoon, Sallie Mae blinked.
“We have been giving careful consideration to our policy for some time, and we are changing it to apply the good-faith payment to the customers’ balance after they resume a track record of on-time payments,” it said in a statement.
Patricia Christel, a Sallie Mae spokeswoman, said that about 4 percent of its private student loans are in forbearance. The new policy will be retroactive to forbearances started Jan. 1.
Ms. Gray was pleased, if cautious.
“It’s a partial victory,” she said. “They’re still charging a forbearance fee, which they don’t for federal loans. I’m glad they’re not pocketing the fee, but they’re still charging it. And I still can’t pay it.”
By comparison with Sallie Mae, she said, her credit-card companies seem pleasantly responsive.
“With Sallie Mae harassing me with collection calls while they’re tacking on $1,100 in interest every three months, and refusing to work with me, it’s ridiculous to say, but it’s made me hold up credit card companies as kind to consumers,” she said.
Ms. Gray, who held a job in school, said her $40,000 in loans have ballooned to more than $65,000. In a better economy, she said, her master’s degree in geography and expertise in geographic information systems would make her a good candidate for a job working with census or health statistics. But so far, she said, nothing has been forthcoming.
Back when she was borrowing, said Ms. Gray, whose parents died when she was young, no one explained the difference between federal and private loans.
“I was under the impression that Sallie Mae was a governmental agency, a nonprofit, with the same terms as federal loans,” she said.
But with federal loans, there is no forbearance fee, and sometimes there is even an opportunity to put off not just loan payments but interest accrual. Even better, with federal loans, she might have been eligible for income-based repayment, in which borrowers make up to 25 years of payments based on their income — payments of zero for those who are unemployed or earn very little — and have any remaining federal debt discharged.
“Private student loans have been so grossly under-regulated that this is just one of many issues that need to be addressed on a broader level,” said Lauren Asher, a founder of the Project on Student Debt. “Private loan borrowers are at the mercy of their lenders if they hit hard times.”
Ms. Gray said that her biggest worry is default — and the prospect of having her credit ruined so she would be unable to buy a house or car, or perhaps, since many employers check credit, even to land a job.
“Student debt has sort of stalled my generation in a state of arrested development,” she said. “You can discharge gambling debt or child support obligations in bankruptcy, but not student debt, so I guess in the eyes of the law, it’s better to be a deadbeat dad than an unemployed graduate with loans.”