Mae, the nation’s leading provider of saving- and paying-for-college
programs, today announced that it will create 2,000 jobs by returning
its overseas operations to the U.S. Specifically, Sallie Mae will hire
call center, information technology, and operations support positions
in various communities across the country..."The
current economic environment has caused our communities to struggle
with job losses. They need jobs, and we will put 2,000 of them into
U.S. facilities as soon as we possibly can.” Sallie Mae expects to hire these employees over the next 18 months.
The light bulb went off as I was reviewing the first set of performance metrics for the four new DL servicers. The default metrics looked quite good with the only blemish being a 0.01% default rate figure for the prop. school category serviced by Great Lakes. Of course, it's hard to default when almost all of your borrowers are still in school. Sallie Mae executives have noted that default figures are not likely to factor into the allocation methodology for several years until the portfolio ages and students enter repayment.
That led me to think about who is making sure that borrowers in repayment are not defaulting, which led me to the exercise below. So, who's keeping an eye on the bulk of the $621.1 billion in federal loan debt? [Hint: Many companies that don't have a long-term future in the business and therefore may be distracted as they figure out their exit strategies or how to maximize their cash flows.]
Hmmm, bet you can guess the answer to that question. Still, you might be surprised to know that the Dept. doesn't independently survey any borrowers to measure satisfaction levels, which I think is dangerous. The 2008 RFQ for collectors of defaulted federal student loans were to have the allocation of accounts determined by how they stack up against these criteria:
With Sallie Mae town convening another round of town hall meetings (for round 1 details and a further exploration of the jobs issue, see this post) in Florida and Indiana highlighting the potential job losses at their loan servicing centers in those states, I thought it would be useful to revisit an earlier jobs announcement that Sallie Mae made in April of this year.
It's a question that I get asked all the time: How well are borrowers in the Direct Lending program being served today? So, on August 20th, I emailed the Department of Education the following FOIA request:
"The performance ratings that the Department of Education has collected in the evaluation of the current DL servicer, ACS."
Seems kinda simple, right? I got my answer this week, which included the following paragraph (FOIA's version of the dreaded "Dear John" letter):
The Chronicle of Higher Education reports that a technical glitch may be responsible for the low number of students who have applied for the new income-based repayment plan since it took effect on July 1st. The glitch (which I might even call a snafu, since the law creating this program passed in October of 2007) is that the Department's account repayment website doesn't include "Income-Based Repayment" as an option in their drop-down menu [Borrowers can download the form on the site and mail it in]. Hmmm..is it any surprise then that only 14,000 borrowers had applied (with 4,500 approvals) for the program. At a time when defaults are rising, IBR, which sets borrower payments based on income levels, was expected to provide some needed relief. With many recent graduates having difficulties in the job market and with many loans entering repayment in November, it sure would be nice to have that drop-down menu option added sooner rather than later.
As the Federal Reserve noted in the consumer research about private education loans, students and parents like to talk to someone before making the purchase decision:
"However, some are uneasy with the Internet being the only source and
want to speak with a live person due to the complexity and magnitude of
the financial commitment. They also find it more difficult to judge a
bank’s credibility online."
SLA wanted to assess the quality of information that students or their parents might receive from the call center operations of student lenders. We placed over 140 calls from June to September of this year to eight top lenders, including Wells Fargo, SunTrust, Sallie Mae, PNC, Chase, Discover, Citizens Bank and Citibank. Each of these lenders provide both federal student loans and private loans. Our caller requested general information about finding a student loan which helped us understand the degree to which lenders assess each caller's needs. As the call progressed the caller would then ask for details about federal and private loan programs which allowed us to determine the quality and depth of information provided.