How To Deal With Sallie Mae – Empowering Yourself
The following involves advice on how to beat Sallie Mae and deal with your debt. If you absolutely cannot pay your debt and Sallie Mae won’t work with you, use this advice and you may be able to discharge your loans, or at least end up with realistic payments.
This article was originally posted on the TrackBitCoins blog by an anonymous poster. I cannot validate the information, but as it seems helpful, I am posting it in full.
“Looking for help with Sallie Mae? Hopefully I can help. I’m not a lawyer. I’m just a guy with some experience in dealing with student loan companies. At one point I dealt with having a lot of debt. Over $100,000. Big number, isn’t it? I’ve been stressed about dealing with collections companies for a while now, and have finally determined a course of action for myself. After making interest only payments for about 12-16 months, as much as $800/month, I discovered I just couldn’t afford it. My income was going down because other young graduates were willing to pick up work shifts for less money. Plus my balance was going up with time. It took a lot of research, pondering and fortunately landing a few good conversations with lawyers. I also had a job as a paralegal for two years (which doesn’t pay as well as some people think), so I saw lawyers negotiating with insurance companies on a daily basis. They were really good at it too.
Some of what you read here you’ll already know, but I’m compiling everything I can so new people can educate themselves on how to deal with Sallie Mae – and not be a depressed hermit because they decided to educate themselves.
FIRST – I recommend that if you start reading this, then you read the whole thing. Don’t read part of it, feel all strong and powerful, and then do something stupid. Read the whole thing or risk making a move that will surely lead to you doing something you will regret.
SECOND – I am not a lawyer. Don’t take this as legal advice. Do your own research. There are no quick fixes in this stuff. If you’re lazy, it will NEVER go away. Even if you’re motivated it might not go away, but there’s a much better chance it will. Get busy, research, empower yourself, and take action.
A Little Background Info On Sallie Mae (A Brief Intro)
Sallie Mae is a private company. In 1972 the company transitioned from being a government organization to becoming a private bank. Since then, it has seen a class-action lawsuit against the company for almost each year.
People have complained more about Sallie Mae to the Consumer Financial Protection Bureau than any other company. More than 1,500 complains have been verified, which is approximately half of the 3,485 complains that the Bureau has received in total.
Sallie Mae spends millions on marketing to get high-school school students, young people without any personal finance knowledge, to take out massive loans – often $100K+. While I haven’t been able to find official numbers, I can say that Sallie Mae is ingrained into the financial structure of nearly every college in the United States. Keep in mind, many of the high school students and college students they target have big dreams, are hopeful of their future, and are seeking to be educated citizens. When I first started college, I dreamed of starting my own advertising company in New York City. I took out loans under the advice that college was the best option and that “I should chase my dreams”.
Additionally, I should mention that I believe college and education are important. With today’s expanding global economy, learning is more important in today’s world than it has ever been. It’s not college that’s screwed up, it’s the financial system surrounding it.
Sallie Mae is very misleading about it’s default rates.
Sallie Mae has been sued a few times about issue relating to their default rates. More than 20% of all loans are defaulted, and probably another 10-15% are in “forbearance”. That’s about 30% or more. That number of students that can’t pay their debt is somewhat incredible. The numbers Sallie Mae publishes on it’s default rate are misleading for a number of reasons:
If potential college students realize how hard life is for college graduates, they might not go to college – which means they might not take out loans from Sallie Mae.
If the figures were made public, the public might do something about it…aka inflict a butt-kicking by politicians that they vote for.
If shareholders knew how bad default rates were, they might not buy stock in the company. People want to invest in companies that make money, not firms that lose money.
Worse of all, by Sallie Mae rationalizing their awful default rates, they legitimize their business practices and feel all “warm and cozy” about the great deed they’re doing for society. I can assure you that few other industries do worse for the world.
How Sallie Mae is misleading about it’s default rates.
Deceiving the public is easy, but what’s more impressive is that Sallie Mae has been able to deceive their own shareholders. They do this by “re-classifying” defaulted debt. Instead of saying some students have defaulted on their debt, they’ll offer a certain percentage of students “forbearance” (which basically lets some students off the hook for a while, but interest keeps building) which means that they can take people out of default. On paper, it looks prettier to investors and potential students. They’re able to claim that less people have defaulted than actually have in reality.
While people are smartening up now, so much damage has been done over the past 20 years. Sallie Mae has made so much money, and fortified so much political power, that they’re able to further screw things up.
The best thing that can happen is for people at ground level to stop dealing with Sallie Mae. If no students accepted Sallie Mae loans, the company would collapse under it’s own default weight. But since students keep borrowing, the company can keep the shenanigans going.
Qualifying Candidates? They Don’t Care. (Or at least they didn’t when the economy was good).
Sallie Mae does a horrible job of qualifying candidates for loans, purposefully. In other words, they do a bad job of determining if you can pay back the loans after graduation. They know that students have very few laws to protect them, therefore they will loan out the maximum amount of money students are willing to accept. By doing this, students are accepting life long servitude before they have a chance to realize what’s happening. Only after they’re in a lifetime of debt do they realize it’s too late. Once someone attends college, they can’t exactly get a refund and hand over their diploma.
At one time, banks would lend carefully. Sallie Mae, on the other hand had a different strategy. Lend haphazardly and deal with it later. You see, Sallie Mae USED TO BE backed by the government. In other words, the government once told Sallie Mae that no matter how much money they lost from lending to defaulted students, the government would pay the difference. That led to poor qualification processes and the student loan bubble we have today. Sallie Mae didn’t care if students couldn’t pay back their loans, because they knew the government would pay the difference. Since then, the government has pulled out and no longer backs Sallie Mae because defaults rose at an astronomical rate. The government should never back a private organization…for the pure reason of what economists call “moral hazard”.
To Sallie Mae it’s a numbers game.
Sallie Mae borrows money at a certain rate and then lends it out to students at a higher rate. For example, they borrow from the central bank at 1% and then lend money to student Susie for 5%. If the size of the loan is $10,000, this means Sallie Mae will earn $400 in revenue for the first year, or 4%. That’s easy to understand, right?
Say this student stops paying their debt. Instead of earning 4%, the company is now losing 1%. See something interesting? Basically, Sallie Mae can lend out money to 5 people, and have 3 people stop paying…and still make money (a 1% profit). That’s because it only takes one person to cover the obligations for the other 3 people before losing money. You can think about it this way too: If Sallie Mae has a 30% default rate, then that means 70% of borrowers are making money. With our 1% and 5% example, that would would mean Sallie Mae would be earning 4% on every paying student (70%) and losing 1% on every defaulted student (30%).
It’s similar to how insurance works. So many people pay into the pool. As more people get into car accidents and the company is forced to “pay out” for car accidents, the company starts to lose money. With Sallie Mae, they just need to have a profitable ratio of payers to defaulters. But don’t forget, insurance companies, similar to Sallie Mae have ways of reducing claims against them. Insurance companies do this by rejecting claims and Sallie Mae has ways of ensuring people keep paying them…aka fear tactics. Fear of bad credit, fear of having one’s wages garnished, fear of being a deadbeat, etc. They even use irrational and non-legitimate threats to scare people.
In the big picture, it’s a numbers game. In our above example, the company can have a 60% default rate and still be in the green. While these numbers may not be spot on, if you do your own research you’ll realize that Sallie Mae is making a killing off the sweat and tears of hardworking college graduates. The federal reserve is only charging about 0.25% to borrow (the amount Sallie Mae pays to borrow money from a bigger bank, or 1% in my example), and in 2008 Sallie Mae was charging 6%-7% for each loan. You do the math.
Why Don’t Student Loan Laws Change?
Sallie Mae doesn’t want student lending laws to change. They’re very clear about this, too. They’re so good about lobbying politicians to reduce current laws to nothing. They spent $16 Million dollars on lobbying from 2008 to 2012 (about $4 Million/year) to prevent students from having consumer protection rights. This money could be used to alleviate stress on students, but instead it’s used to lobby congress into creating fewer protection laws for students. Plus, between 2005 and 2011 Sallie Mae has employed more than 60 registered lobbyists in 9 states.
In fact, Sallie Mae was so successful at lobbying during the Bush administration that they pushed for President Bush to sign the “Ensuring Continued Access to Student Loans Act” of 2008. This act alone has resulted in tremendous debt burdens on students, and those debt burdens can only be alleviated by tax-payers bailing out Sallie Mae and similar organizations when things take a turn for the worse. Instead of the burden being lightened for students, Sallie Mae pushed more loans on students than ever before.
Since President Obama took office, little has been done to relieve students of their debt burden. The only helpful piece of legislation created was the “Income-Based Repayment Plan”, but that only applies to federal loans, not private loans.
Why Doesn’t There Ever Seem to Be Answers Online?
Ever noticed how there’s very few “solutions” online about how to deal with Sallie Mae? It’s almost like someone’s removing information purposefully. Well, that’s because they are. Sallie Mae and other financial organizations are masters at controlling information. Sallie Mae doesn’t like negative information online about their company. They don’t like people having answers and solutions of where to turn to.
Have you heard of “reputation management”? That’s one way companies like Sallie Mae ensure only positive information is available online about their company. They pay third parties to scour the web and threaten legal action on people that speak against the organization and hosting providers that host the threatening copy. By doing this they’re able to have much of the content taken down from the web.
How Sallie Mae Prevents People From Being Informed
Additionally, there’s another key way they shut people up. During a settlement, they can (and do) use a “non-disclosure” clause saying that they require that none of the information regarding the case be publicized as part of the agreement. That way, nobody that wins a settlement against Sallie Mae will legally be able to publish their settlement information elsewhere. They don’t want everyone to read case docs and start empowering themselves.
Notice how I said “settlement”, not “court case”. This is because Sallie Mae nearly always settles disputes outside of court. Court cases that are highly publicized are Kryptonite to Sallie Mae. They want to do everything in their power to keep their business dealings quiet and away from public view.
This literally means that anyone that is successful at resolving their own student debt crisis is held captive from being able to share their story. It’s the same concept as prison – once one inmate escapes the jail, they can’t exactly come back to inform the other inmates of how to do it, at least not without risking their own tail. Well, and college graduates aren’t guilty of a crime.
HOW TO NEGOTIATE WITH SALLIE MAE
Before we get started, realize that everything in life is negotiable. People and companies re-negotiate contracts all the time. If you’re fair and reasonable, you can negotiate your contract. A student loan debt obligation is a contract.
Additionally, realize that everything you do will change the negotiation playing field. Every action you make will either help you or hurt you. And sometimes doing what you think is “the right thing” can hurt you the most. In business matters such as debt, you should only decide what is “right” or “wrong”, based on how beneficial it will be to you in the long run (while of course abiding by the law). Sound bad? Well you can bet that these companies are doing the same thing. They don’t care what is ethical and sometimes they don’t care what the law is…because they have lawyers that decide what is “right or wrong” for them. These people are not your friends no matter how “sweet” the “nice debt collector lady” sounds over the phone.
Half of negotiating is taking the correct steps now so that you can have a better negotiating position in the future. Nobody ever knows how a negotiation will work out, but smart people prepare and do what they need to. If wearing a pink dinosaur outfit on the corner of main street while hopping on one leg and yelling “buy some fuzzy popcorn” will strengthen your negotiation power, then get hopping! Ok, that’s ridiculous, but you get the point.
People in the United States seem to take prices at face value. In 90% of other countries in the world, people haggle and barter with each other. While negotiating may seem uncomfortable to you, you should realize that that’s part of the reason why you’re in this mess. Smart business people negotiate and re-negotiate. When I was 18 years old and had a burning desire to go to college, I didn’t think negotiating finances of any kind was possible. In the USA, we seem to think that prices are written into stone. But now that I’m done with school, I realize that negotiating is an important part of success in life. It applies to credit cards, insurance rates, mortgage rates, buying a house, going on vacation, paying for local services and student loans. Student lenders like Sallie Mae, Wells Fargo, and the federal government takes a risk by giving students money (which they consider investments). When I decided to go to college, I took a risk by investing in myself. But what happened was the economy failed me…which was not my fault. When conditions change, contracts get re-negotiated. Contracts, while helpful guides, never guarantee an outcome for either side. What they do is ensure that both parties will do everything in their power to honor the contract.
That is key. “Doing everything in your power” means that you tried as much as you could to honor your contract. With debt obligations (loans) it means you worked hard to make the payments, tried to improve your income situation so that you could make the payments, and avoided default at all cost.
Among college students, I see a large number of graduates becoming depressed and feeling like they are failures. The truth is, there are three failures in the situation. First, you failed at honoring your contract (which we already know). Second, the economy has failed at providing you a valid income (which is true if you have legitimately tried to increase your income). Think of this…there are approximately 21 million unemployed young people in our country…that means there are a lot of defaulted college graduates. You are not alone. Third, the lender has failed at providing money that they couldn’t ensure you could afford. This means it took too much risk…and that’s not your fault. So slow down there kiddos, you’re not the only one that’s guilty.
Student lenders have a responsibility too. They must lend only as much as they think you can afford. Think, if Sallie Mae handed you $10 Million, don’t you think they have some responsibility in making such a foolish decision? Sure they would. I mean, you would be responsible too, but part of the responsibility lies on the lender too. That’s exactly why JP Morgan, CountryWide and Bank of America are getting sued by the federal government right now…because they gave homeowners mortgages (loans) that they knew they couldn’t pay. So not only is over-lending unethical, but it’s also illegal.
If you can’t pay Sallie Mae, then don’t.
Stop sacrificing your rent or food money to enrich the lives of the wealthy. Sallie Mae is a private corporation that has one of the highest paid CEO’s in the country. They don’t care about you. This is a corporation, not a social group or a charity. They have one legal obligation – to answer to their shareholders. Sallie Mae has a history of unethically coercing graduates into paying loans before rent, thus eventually rendering some graduates homeless! Why? To earn more money for their wealthy shareholders. Of course, if you can pay Sallie Mae then you should! Good for you…why are you reading this…Go back to work or go play frisbee.
But, if you can’t pay Sallie Mae, then it’s time to start thinking critically about your situation. Putting food on the table, having warm clothes to wear and keeping a roof over your head will always be priority. We’re humans, not animals. We don’t starve, we don’t freeze at night and we don’t live in caves (well, unwillingly anyway). Don’t allow yourself to be reduced to being an animal. If things get bad, use your brain to fight back. Learn and take action. There’s a balance between trying to honor a contract and reducing your lifestyle to medieval time standards and sacrificing things that should be nothing more than human rights: clean water, food, clothes and shelter.
Please remember, I’m not a lawyer, nor a financial consultant. I’m a graduate with a 4 year degree and a boatload of troubles from debt. It’s taken me nearly 2 years to realize how to effectively gather information on this subject, determine a course of action, and get the process started. Don’t take my word for it, go consult a lawyer before making any decisions. I know, I know…I can’ afford a lawyer either.
What will happen if you don’t pay Sallie Mae.
1. Your interest will keep growing, even if you use a forbearance or deferment.
Don’t feel happy about being able to use forbearance or deferment…It only kicks the proverbial can (judgement day) down the road. Your interest will grow and your balance will surely go up. If you think that at some point you won’t be able to keep up with loan bills, then you might as well suffer the pain now, rather than let the interest build up and explode at a delicate point when you own a home, have a family, or actually have something to lose. Forbearance may ease the pain for a few months, but you can be certain that the pain is coming…and it’ll be a bloody mess.
Fortunately for me (and most students), I have nothing to lose. Sallie Mae can’t squeeze blood from a rock, right? How the heck are they going to squeeze money from a broke ass population of college graduates? They’re not, and they know it…that’s why it’s an important part of your negotiation tactics (keep reading).
2. Your balance will go up.
Sallie Mae often tacks on fees to intimidate college graduates into making payments. Some fees are legitimate, and some fees are not legitimate. Medical and law students are known for reaching debts higher than $400,000. But, what’s strange is that Sallie Mae debt will often double, triple or quadruple before it’s paid off. Not only from interest, but fees and “selling the debt” to third parties. Every time your debt is bought and sold, it becomes more expensive, and that money usually comes from tacking on fees to your defaulted debt. By raising debt figures for individual students, not only does Sallie Mae make more money, but they inflict more fear into students. This results in the students making a poor decision, scrapping together some pointless payment out of emotion, and acknowledging the debt when they shouldn’t (big no no).
Hell, sometimes people’s loan balances go up even while they’re making payments. This is because Sallie Mae is very crafty with fees, how they withhold information, and misinform students about their payment options. It boggles the mind why someone would make a payment on a non-revolving debt that’s actually growing. Really, next year is when you’ll land that six figure job? Unlikely. The economy sucks and there are at least 200 other people gunning for that job. Meanwhile your balance will keep growing until the day when you cannot afford it, and even then you are still probably daydreaming about that big sexy job in the city with the corner office. Hey, I’m not saying to stop dreaming…I’m saying to dream, but handle your student debt as if nothing will change…because at this point, nothing has actually changed for you. It’s best to plan for the worst and hope for the best, right?
3. Your credit will get hurt. This is not as bad as it sounds, but it’s surely not good. It’s like a tree falling in the woods, it doesn’t effect anyone unless you actually need that tree to build a house, refinance another loan (tisk tisk), or establish good credit.
After this whole debacle, I’ve learned that credit in itself is certainly a scam, created by banks for the benefit of banks. During the 2008 economic meltdown, many credit card companies jacked up interest rates on credit card holders that hadn’t missed a payment. People were pissed off to say the least…but it was acceptable because it was written into their “terms of service”. Additionally, did you know that having a credit card, but NOT using it, will damage your credit? And if you don’t have any credit history, that’s actually worse than having bad credit? Or try this…your FICO score (credit score) often has incorrect information on so that banks can try to legitimize charging you higher rates any time you need to borrow money (mortgage, credit card, student loans, etc). Worse, it takes many months and proof by documentation in order to change your credit report information, even if it’s blatantly incorrect. Credit reports are banks best weapon.
4. It’ll be more difficult to rent an apartment. I’m going to call BS on this one, but some people worry about it. The truth is, someones renting history has nothing to do with their credit report, and most landlords know this. Just because I’ve defaulted on a loan, doesn’t mean that I won’t pay my rent. In fact, anybody would agree that rent would come first.
Unless you’re trying to rent a luxury highrise from some bank-owned corporation in the heart of Manhattan, you’ll probably be fine if you have good references, proof of income and enough cash to cover the deposit. I’ve lived a number of cities and have never had a landlord reject me for having bad credit. That’s because I always pay my rent, don’t play games with money and I’m confident about being a good person. I take care of the people that take care of me and offer respect to as many people as possible.
5. Your phone will not stop ringing. This is true. Debt collectors are ruthless. Once they put you on a list, that phone number will forever get calls. You will get phone calls and they will not stop until you resolve the debt in some way. That could mean paying off the debt (unlikely), going to court over the debt (possible), re-negotiate the terms of the debt outside of court (likely) or having the statute of limitations on your debt expire (possible).
6. Your cosigners will get calls. This is probably the worst part of the situation. See, I don’t really care if my credit gets hurt, but I don’t like the idea of someone I love feels stress over a situation I was involved in creating. But, you need to realize that everyone is somewhat responsible for what’s happening. By your cosigner signing for your loans, and the bank lending you too much money, then your cosigner should be equally pissed off at the bank. You tried making payments and did everything in your power to boost your income. But unfortunately, the economy is tough, the banks lent too much money during good economic times and expected unreasonably high interest payments after the economy imploded. Always communicate with your cosigners. Tell them about the situation. Apologize for the situation. Tell them to expect more phone calls but assure them that you’re doing everything possible to resolve the debt.
Additionally, tell your cosigner not to make any rash decisions by making a payment of any amount. This may sound counter-intuitive, so handle your conversation with your cosigner delicately. Even a $20 payment from your cosigner will reset the statute of limitations on THEM (not necessarily you, the college graduate/student). While a $20 payment may seem like a good option because it proves that your cosigner “tried”, there are much better ways to show that you tried (by writing letters, keep reading). Additionally, making a payment at this point will guarantee that interest keeps growing and will immediately reset the Statute of Limitations for whomever makes the payment. I’m not a lawyer or financial planner, but I have about 2 years worth of experience and research with this stuff.
They best thing you can do is demonstrate that you’re handling everything, you’re being pro-active, and you WILL solve the problem. Be 100% certain to communicate with your cosigner. Don’t ever hide from them, because that is unfair, unethical and just makes you a jerk.
Stop going into further debt.
Going into debt for anything should never happen, and should be a last resort, emergency event. If you hate debt, then you should never need credit. I’m a little extreme with this. After dealing with student loans, I’ve vowed never again to go into debt…and I’ve been able to sleep 1,000 times better a night without debt.
If student loan companies weren’t such jerks…then they wouldn’t have ruined future opportunities for other banks. You see, at one time I would have considered taking out a mortgage (loan) to buy a house, or purchasing a car with an auto loan (which I did before my student loans and had a good experience). Banks overall could have potentially made a million bucks off of me.
But now that I’ve been victim to a cruel and unjust bank, I’ve decided the costs aren’t worth the benefit. Now I will only purchase a home if I can pay with cash. I’m stubborn like that…screw me over and I’ll never do business with you (and your friends) again. Sallie Mae’s friends are other banks. I don’t care how stellar other bank’s reputations are…I’ll never deal with them again.
Also, it feels good to know that I’m not perpetuating a debt system. Every time someone goes into debt, they create jobs in financial companies, raise budgets for marketing departments and enforce the legitimacy of a debt-based economic system. With each interest payment, you’re paying mostly interest and very little principal. This means the interest you pay is 80%-90% profit to the corporation and shareholders. These jobs and marketing budgets are exactly what all these companies use to find even more customers, and lock them into debt too.
I don’t know about you, but knowing this information makes me want to break the cycle. You too?
Stop acknowledging the debt if you can’t make steady payments under a written agreement that both parties have agreed to and you have undeniable proof of.
Any debt collector’s goal is always to get you to acknowledge the debt. They do this in very tricky and subtle ways. Anytime you say “my debt”, or “the debt that I took out”, or make a payment, you’re claiming the debt is yours. By you acknowledging the debt, you take responsibility for it which increases the statute of limitations on it (the amount of time the debt will expire). IT IS CRITICAL THAT YOU UNDERSTAND THIS – The statute of limitations or “SOL” varies from state to state, but it’s typically 6 years. After 6 years, the debt is basically dead. They must stop damaging your credit report and must comply with your wishes to stop being emailed, mailed and called about the debt. This will result in them writing off the debt and giving up. Please note, debt owed to the federal government does not have an SOL, but it can still be negotiated. But the point is this – don’t acknowledge the debt unless you’ve thoroughly thought it out and have a long-term plan.
Debt collectors don’t want the debt to expire, because it means they’re less likely to collect on the debt. But fortunately for you, the SOL is a protection for you. Every state in the USA has it written in their laws. At the very least, it gives you negotiating power. You see, debt collectors know the laws, but they hope that you don’t. If you know that the SOL is only a year or two away, you can more easily negotiate the terms or balance of the debt. Additionally, you can wait until the SOL time is up, but debt collectors will probably try take you to court before that happens. If you’ve been fair and reasonable with them, they probably will not win the case.
Making a payment means acknowledging debt. Sometimes students or cosigners will get frustrated and make a payment out of fear, figuring that “anything is better than nothing”. While sometimes this thought process is true for smaller debts, it’s hardly true for larger debts.
Don’t make a payment unless you’re confident that you can keep making payments in the future and that the payment you’re making will actually help reduce the principal (not just interest!). Without knowing these two things, you’re setting yourself up for failure and only postponing the day that your world falls apart.
Defaulted? Get a paper trail going ASAP.
This means stopping phone conversations and start writing letters. A paper trail ensures you have records of your correspondence and record of any agreements made with Sallie Mae. Note, this is Sallie Mae’s worst nightmare. By dealing with written letters, Sallie Mae has to hand-write letters (which takes time) and they have to actually put effort into negotiating with graduates…which they absolutely do not want to do. They don’t want graduates feeling empowered in any way. They would much prefer you deal with their cookie-cutter letters and only discuss loan terms on the telephone.
Sallie Mae will tell you “that’s not how we do business”, exactly in the same way they told me the same thing. It’s BS. Every corporation uses mail and writes letters. No company would survive if it didn’t receive and send mail. Get a paper trail going and send everything Certified Mail every time.
They will go after your cosigners almost immediately when you start sending letters.
Banks are smart…they know that when you default on a debt, their best option is taking the path of least resistance to get their money back. And that means going directly to your cosigner and seeing how much money they can potentially take from them. They know that you writing letters is a sign that you’re trying to build a paper trail…they’re not dumb.
Slow down, it’s not as scary as it sounds. They can’t take anyone’s property, seize bank accounts or garnish wages without a court order – which ultimately means being sued. Debt collectors can’t just call the police and kick you out of your house because you missed payments and can’t afford your student loan bills. Their is a process. By the way, rarely do debt collectors go after property, they usually only target employment income and bank savings, because states typically have laws protecting families homes. State and town governments basically know that banks are jerks and would be fine with making you homeless if it meant getting their money.
Laws vary from to state to state. The best states to live in are Massachusetts, Texas and New York (that I’m aware of) and the worst state to live in is Kentucky which has a Statute of Limitations of 15 years last time I checked. To people in Kentucky, my advice is this: MOVE TO ANOTHER STATE. Your Senators have basically took a big crap on your state by buying into the corporate banking interests. Ultimately, do your research. Find out your state laws to a point. Know everything you can before making any decisions (both you and cosigners).
Also, tell your cosigner never to communicate with Sallie Mae, except with letters that you approve first (because you’re handling it, remember?). And tell them to never give Sallie Mae any private information about themselves or their employment situation. Your cosigner’s employer is not responsible for providing any employment information unless a court order or judgement has been issued.
By the way, court orders don’t just “happen”. The debt collector must hire a lawyer in your state (which is expensive), provide all legal documents to them (which is difficult), bring a case against you in your jurisdiction, notify you (aka “serve you” properly), demonstrate to the county clerk why they have a valid case, give you ample time to provide a rebuttal to the county clerk, then the clerk decides if the case is valid, then sends a “summons” which means a date that you must show up at court, then show up at court and persuade the judge that you’re a loser/deadbeat/punk/jerk/asshole, that they tried being reasonable with you, that you were unreasonable, that they were innocent, they abided by every law (and never broke the law), and the judge must rule in their favor….AND ONLY THEN does that mean your cosigner is on the hook. That’s a lot of stuff to happen, isn’t it? And it’s even more unlikely with you being fair and reasonable the entire time. Keep reading…
Never show all of your cards.
Always give as little information to the opposing party as possible. In war, the more information the enemy has about you, the stronger they are. This has never been more true with debt collection.
Never give them your employers name or business name.
If you move, don’t give them your new address. Try to have mail forwarded for as long as possible without divulging where your new address is. But be sure to put your mailing address on each letter you send so they can send you letters back if they need to.
Never give them a phone number of any type for any reason. They will call it – repeatedly.
Make all of your social media profiles private – yes, they have contacted my facebook friends.
Never send a personal check. Always use bankers checks. When you give personal checks you’re setting the debt collector up with your account information in case they ever want to garnish your bank account or just take funds without approval.
Your letter sequence should be something like this: (all sent by certified mail)
Letter 1: Request to cease all phone calls and request only mail communication.Specifically ask them not to contact you at work, EVER.
Letter 2: Request documentation and proof of debt validity.
Letter 3: Request that you’d like to resolve the debt. (DO NOT acknowledge the debt)
Letter 4-10: Keep trying to get them to negotiate with you by mail. Don’t make any offers until you hear back from the company by mail and have some communication in progress.
Letter 11,-14: File complaints with Consumer Financial Protection Bureau (CFPB), the Attorney General of your jurisdiction, the U.S. Senate Committee on Health, Education and Pensions (“HELP”), Sallie Mae itself, and anyone else with power.
Letter 15: If still no reasonable response exists from Sallie Mae, send a final letter stating that you’re seeking legal counsel and will be seeking legal recourse. Of course, if the statute of limitations is about to expire at this point, then stop writing to them…you’ve done enough. Chances are that Sallie Mae will have responded far before this point. But if they haven’t, then I suggest either waiting for the SOL to expire or actively seeking a lawyer and taking Sallie Mae to court. Sallie Mae will surely settle outside of court, and that settlement will be your golden ticket to more reasonable loan terms. Additionally, after sending all these letters, I would assume most courts would rule in your favor.
Space each letter about 1-2 weeks apart. This shows that you were diligent in writing to them.
What terms you should negotiate with Sallie Mae (if they DO mail you back).
This is the difficult part, because it’s personal to your situation. Basically, you should look at it like this…you can’t afford your loans right? Well, what can you afford? Can you afford $20 per month? $50? $200?
Remember, this is negotiation – the goal is to negotiate the amount to a reasonable amount that YOU can afford. Don’t do Sallie Mae any favors, stick to business. If you can afford $200 per month, then maybe start off offering $100 per month and then offer $120, and so on. It’s best to ensure you have a buffer in case any unexpected bills come up. I don’t suggest negotiating your family’s Christmas money either…especially if you have kids. It’s not fair to your family.
Here’s an example offer: (DO NOT USE THIS – COME UP WITH YOUR OWN!)
“This is not an acknowledgement of debt. This letter should be found without prejudice unless both parties mutually agree to it’s terms. If Sallie Mae is willing to agree to the following terms, I will expect written and signed verification.”
Terms: 48 months (4 years)
End-Date: September 2018 (4 years from sent date)
Offer Expiration: 2 weeks from date received (sent via certified mail).
By agreeing to these terms, Sallie Mae agrees not to charge late fees during the terms of this agreement, not to contact any cosigners on the loans, and considers this agreement valid and enforceable under the law.
Johnny Walker Blue (Your name, but do not use a handwritten signature)
I’ve been advised by lawyers not to use a handwritten signature because it creates potential problems in court…aka it can empower Sallie Mae’s lawyers. So I wouldn’t suggest signing anything unless you are absolutely certain it’s an agreement that you’re satisfied with, that you can afford every month, and that Sallie Mae actually requests a signature.
Have a plan before you get started. Know how much you can afford to pay, how long you’re willing to pay it, and when your last payment will be. Think a little creatively, just be sure to be fair and reasonable.
Don’t acknowledge the debt while writing to Sallie Mae.
It’s possible to write a letter to a debt collector without acknowledging the debt. It sound tricky, but you must deal with it this way.
To do so, you must do two things. First, always put “this is not an acknowledgement of a debt” at the top and bottom of each letter you send. Second, when discussing the debt, it’s fair to say things like “I’m contacting you to resolve the issue at hand” and “I’m concerned with the status of any debt claims against me and would like to work diligently to resolve this matter”.
It’s like rubbing your head while patting your belly and dancing in place. It might seem uncomfortable to write like this in a letter, but this is serious stuff. By doing this it shows you’re putting forward a valiant effort to resolve the debt, but you’re not taking responsibility for it UNTIL they provide you with official loan documents, terms and conditions, balance and payment history, applications and proof of fund disbursements.
Don’t send a “cease and desist” letter.
A “cease and desist” has a very particular purpose. It is a letter with one purpose: End all communication between you and the debt collector. This screws you over in three ways: 1) It stops all communication with the company which you don’t want, 2) Will most likely result in you being sued, and 3) You will lose the court case if sued.
When I called Sallie Mae to request their mailing address to ensure mail communication only, the company kept asking if I wanted to mail them a “cease and desist”. At first, I wasn’t sure why they kept asking…but the reason became clear – they wanted me to mail them a cease and desist, because then they could sue me and possibly win. If you’re on the hook for a student loan and send a cease and desist letter, a court would likely vote that you weren’t being fair and reasonable by not communicating with the loan company.
What you want is only MAIL communication. So you don’t want to stop all communication! Sending mail is a fair and reasonable communication method and will save your butt. Don’t ever, never ever, send a cease and desist unless you have undeniable proof of legitimate harassment, racism or negligence that has harmed you (with a quantifiable amount and SOLID proof).
Never make a decision quickly (while emotional or reacting out of fear).
This is exactly what the debt collector wants. They want you to “react” based on whatever garbage they say or send to you. Granted by this point, you’ll be communicating by mail, so Sallie Mae will be much less likely to harass or make claims that are untrue. They realize that by you requesting handwritten letters you’ve smartened up. And they also realize that there is a good chance that their letters will show up in court…so they won’t say anything to incriminate themselves.
First off, stop answering phone calls from debt collectors unless it’s to 1. Request their mailing address or 2. Say “have you received my letters? Please respond to my letters.” That’s it. Say nothing more.
Second, never make a split second decision…because statistics say you will almost always make an incorrect decision. When you receive a letter from a debt collector, do your research about debt collection laws, determine your course of action, and then carefully craft your response letter to them.
Before making a payment to a debt collector, you are legally allowed to request validation of the debt. This means that if you request that the debt collector to prove that you owe the debt, they must provide it to you if you requested validation within 30 days of them initially requesting payment on the debt. Sound confusing? They need to prove you owe the debt…that’s it!
If you request validation, they must provide you with any appropriate documents to prove that you are responsible for the debt along with balance information, payment history and current interest rates and fees that have been added. Know this too: Appropriate validation documents = grey area. There is no legal standard for what documents “validate” or “verify” that a debt is actually owed. This is good and bad. It means that if you use this in a court case claiming “the debt collectors efforts to validate the debt weren’t sufficient”, then your statement is a wild card. Nobody knows if it will help or hurt your court case because it depends on what documents are provided and how the court perceives the debt collectors efforts.
I would say this: If the debt collector sends you LEGIBLE and SIGNED agreements (copies or originals) that includes ALL pages of the signed contracts…and the contracts have your signature and date, plus balance and a payment history…only then the debt is considered valid. Debt collectors and original creditors have a history of losing people’s documents or even using faulty documents in court cases. If they can’t provide you with valid and reasonable validation, then send a letter again requesting validation, and ask why they cannot provide it for you. This will re-enforce to the courts that you’re pro-active in resolving the debts, IF you or the debt collector ever brings a lawsuit against the opposing party.
But don’t forget, even if the debt collector takes the necessary steps to validate the debt to you – just because a debt is validated, doesn’t mean that the debt collector doesn’t need to work with you to help you afford the payments. If the debt collector doesn’t respond to your letters, leaves harassing voicemails, or breaks the law in any way, then you’ve got a leg up. If they ever tried to sue you…then you’ve got proof that you tried and your efforts were thwarted.
This paper trail will save your butt at some point or another in the future.
By trying to negotiate with Sallie Mae in writing, if the case ever goes to court (or YOU sue Sallie Mae), then you have the documents necessary to prove that you tried to be “fair and reasonable”. This is huge. You need to show that you tried. If you don’t at least do that, then you will lose in a court case if Sallie Mae tries to sue you. Worse, you have no grounds for suing Sallie Mae at all if you have no way to prove that you tried negotiating via mail. Get a paper trail going and get the ball rolling with negotiating with Sallie Mae.
Chances are, they won’t respond to your first 3 letters, because they want you to feel hopeless and they’ll claim that your letters take a long time to “process”. This works to your advantage though…The more letters you write before Sallie Mae starts responding, the more a court will demonize Sallie Mae and uphold your side of the case because you tried repeatedly, without any luck, to communicate with them. Companies, regardless of size, have a responsibility to be fair…and if they’re not, then the court system won’t rule in their favor. Companies can’t just treat people however they want. Can you imagine what life would be like if they could treat everyone like dirt?
Recording Phone Conversations (only if you must call).
Sallie Mae records most, if not all, of the phone calls they have with students. Meanwhile, they tell students that they can’t record their phone calls. Hmmm, interesting huh? They do this because they want to maintain power over the conversation and any record keeping. They don’t want you to have any records.
By you having records, you have proof in court of what Sallie Mae has said, and that can be used against them. By them having records, and you not having records, you feel powerless and you have no “proof” of what Sallie Mae has told you over the phone. This ensures that if your case goes to court, you will have little to no evidence. First off, there are no legal grounds against you if you record a phone call. As long as you make it known that you are going to record a phone call, then Sallie Mae can’t threaten to sue you. All they can do is either keep talking or hang up. That part is up to them.
Keep in mind that writing letters and keeping copies is the best possible option for dealing with Sallie Mae. Phone calls are hard to track, record and use in court. Documents are more official in a court setting too.
They will try to pressure you into unreasonable “plans” and “special offers”.
At first, Sallie Mae will try to make it seem like they are willing to play ball. They want you to think that they are negotiating with you…But they are absolutely not. Consider this: When someone negotiates with you, they’re taking your side of the equation into consideration. If you say, “I can only afford $50 per month”, but they say “our plan requires $150 per month” then they are not negotiating. Negotiation doesn’t involve “plans”, it involves being flexible. When they are not taking your side of the equation into consideration, and are only trying to pressure you into a pre-determined plan that they have arranged, then say “NO, that won’t work for me” and start over. By the way, these plans and offers do nothing for you. They will 100% of the time make MORE money off these “special offers”. Either by extending the life of the loan 10 years, eventually raising interest rates or demanding additional up-front fees, Sallie Mae will do everything it can to get you to think you’re getting a good deal. Don’t fall for it. Negotiate only on a fair and reasonable playing ground. Remember, it’s best to do this all in writing so you have record of all communication and record of any agreements made.
Sallie Mae nearly always settles outside of courts for two reasons:
1. There is a good chance they will lose the court case if you deal fairly, something they will not risk. Sallie Mae is already a turd in the public eye, they can’t afford to keep losing court cases.
2. Generally speaking, going to court in the public eye is a bad thing. Court cases are public. Companies don’t like being in the limelight for bad situations. They know it angers people. Judges, juries, the people involved, the public reading the case and journalists all get angry from court cases that seem unfair.
3. More court = less likely success in lobbying efforts. When things go to court, it tends to disgust congress, and congress needs voters to ensure they maintain their seats.
The Fair Debt Collections Practices Act
The Fair Debt Collections Practices Act or “FDCPA” is designed for third party debt collectors. Sallie Mae is a first party debt collector, which means that legally, the laws of the FDCPA don’t apply per-se. But they do use it as a guide. In fact, most first party debt collectors use the FDCPA as a guide because they want to avoid lawsuits and the FDCPA is a reasonable “approach” to regulating how debt collectors should conduct business.
A third party debt collector is when Sallie Mae sells their debt to a “third party”. So, if a debt collector that isn’t Sallie Mae is contacting you about loans that were originated through Sallie Mae, then the FDCPA applies.
The major advantage to you is that most first party debt collectors will honor the FDCPA because it’s seen as a good guide by courts and regulators. While courts can’t uphold lawsuits with third parties on grounds solely on the FDCPA, they can use it as a reference and will probably vote with whomever is most fair and abides by the law in the case.
Get Your Head On Correctly - Don’t Act Emotionally
You should view Sallie Mae as a person, not some big scary organization. Don’t be afraid. Realize that Sallie Mae is a corporation that wants money and wants to spend as little money as possible. By you taking up time and resources, Sallie Mae will get annoyed at you and want you to go away. By you threatening legal action (after sending 5-10+ letters to them), Sallie Mae will need to pay expensive lawyers to deal with you. Sallie Mae doesn’t want to spend money. It wants to make money.The way Sallie Mae makes money is by borrowing money at 1% and lending that same money to students at 5% (as I mentioned earlier in the article). They must negotiate with you because otherwise they are incurring losses the moment you stop paying them. Similarly, if you are fair and reasonable with Sallie Mae, the company will need to be fair and reasonable in return if it wants to get anywhere with dealing with you.
Sallie Mae has lawyers, but that doesn’t matter. As long as you do your research, don’t break the law and put in as much effort as possible to be fair and reasonable, then you have nothing to worry about. Big corporations must act in a rational and effective way, or else they lose money, lose credibility, lose court-cases, and lose investors. These are companies biggest weak spots, and given the right circumstances, can easily crumble the company. Similar to an ice-burg hitting a sweet spot on the Titanic.
The best way to win a court case against a corporation is not to play the game according to their policies and rules. Win by knowing the legal system. This is common war strategy. If you play by their rules, you’ll certainly lose, because they are experts at their domain. Take the battle away from their turf, and all of a sudden they are left half-naked and less powerful.
If I sued Sallie Mae in court, would the judge/jury think I had a reasonable argument for winning my case?
If Sallie Mae sued me, would a judge or jury think Sallie Mae had a reasonable case against me?
Remember, the goal of everything is to be as fair as possible while giving them as little information about yourself. Being taken to court is scary, but if you end up taking Sallie Mae to court, you want the odds stacked in your favor. Sallie Mae is not your friend. Sallie Mae is the mean old rich man at the edge of town that wants to take all of your possessions and leave you and your family on the streets just so he can afford another holiday cocktail party…and he’ll still come back wanting more.
Fortunately for you, this mean old man is a very busy man, has a lot of costs associated with his business practices, doesn’t like going to court, must be fair and reasonable with you, and has a bad reputation in town. All of these things are negotiating tools.
Judgements and Lawsuits (Nasty Little Things)
When you’re sued and you lose the court case, you get a judgement. Judgments are tremendously bad for you. They’re issued from a court and give the creditor (Sallie Mae) the authority to garnish your wages, put a lien on your property, garnish your bank account, and further damage your credit score.
There are two ways not to be hurt from judgements:
A) Don’t lose the lawsuit – this means strengthening your side of the case and doing everything possible to weaken the other side of the case. If you don’t lose, you deflect judgement. If you work hard at this, you may prevail. Odds are better the smarter you are about the actions you take.
B) Be judgement proof – that means, even if you lose the court case, there is little that Sallie Mae can take from you. You don’t have property they can take, so you’re basically immune to the judgement they impose on you. Being judgement proof also means knowing which laws apply in your state. Some states will only allow a certain percentage of money to be taken from your bank or paycheck, etc.
Thought you beat the system by being judgement proof? Wrong. Judgements can have a SOL of 10 years or more, plus they can be renewed. So, if you start working a new job and Sallie Mae finds out, they can contact your employer and demand that your employer turn over up to 25% of your income for 10 years. The moral of the story is this…Don’t lose a court case and always be fair and reasonable. Nobody wants to be a debt fugitive for that long.
I’m getting sued, now what?
Be fair and reasonable. Sounds stupid, right? If I thought I were going to get sued, I would continue writing letters to the opposing party seeking to settle outside of court. This means writing letters that have fair and reasonable offers that you can afford. Like, “Please contact me by mail so we can work this out.” This happens often. Additionally, by putting in a diligent effort to communicate with the other party, and if the other party does NOT attempt to communicate with you, then you can have the case thrown out. Simply write a letter to the court saying that you’ve attempted numerous times to communicate with the plaintiff and be fair, and they refuse to respond.
Courts don’t want to deal with people’s crap (although that is basically their job). If person A is suing person B, but person B is trying to communicate effectively with person A, and person B is being reasonable, then a judge could easily decide to throw person A’s frivolous case out.
More research regarding Student loans.
Although student loan advice is sparse online, here’s a couple tips that can help.
Private student loans are contracts – that means you should really be searching Google for “contract laws in (your state here)”, not “student loan laws”.
Also, whenever you want to find exact phrases, put your search in quotes. That means searching for “won my lawsuit against Sallie Mae” will bring up pages that include that exact text in that order. That search will probably bring up pages that people say things like “I won my lawsuit against Sallie Mae in 2012 by filing harassment charges” because that text is exactly on the page as you searched.
Use forums and keep talking online. Most of us don’t like talking about student loan balances with our friends, but that’s what is awesome about the web. We can get information fairly easily while being anonymous.
If you are a cosigner of student loans, you might as well research student loans as if you took them out yourself – because you may as well have. I’ll do more research on this and update the page appropriately.
Potential Student Loan RoboSigning Lawsuit
This as been discussed occasionally online, but hasn’t really taken off as a viable method of having loan balances reduced…yet. It’s the same argument that worked successfully during the mortgage crisis in 2008. Many mortgage lenders gave out loans to home owners without giving the loans consideration. The companies simply took applicants information and had a computer sign-off on the loan and delivered the funds.
The problem is – how much, if any, consideration was given to the loan application. Approving loans requires human thought and input, not just a red light or green light from a computer program. During the early 2000′s, student loan companies went crazy distributing loans without giving them much consideration because they were making so much money at the time. But then, when students started defaulting on loans and the economy flipped upside down, these loan companies would start suing borrowers saying “hey! hey! They took my money but didn’t pay it back!”
Well, they also tried pulling that crap during the housing melt-down, but courts ruled in favor of homeowners. Banks can’t just give anybody a bunch of money based on a computer algorithm and then expect it to hold up in the legal system. Life isn’t a program. Everybody’s situation is different, and it’s important that financial companies evaluate applicants by hand before just handing over a bunch of cash.
While I do believe that robo-signing is a an unethical process, I haven’t seen any student loan cases that involve the matter. This is probably because it would take a class-action lawsuit, which is tremendously time consuming and expensive to organize. It could be, however, a valid argument when either suing a student loan company, or being sued by a student loan company. Judges and juries aren’t stupid. They’re typically fair at seeing past corporate BS and knowing when the corporation has dealt with someone unfairly and unethically.
Lastly…If This Information is helpful , PRINT THIS PAGE OUT.
This information not only took a couple years of experience to learn, it took about 10 hours to organize and type out for your convenience. I wish I had something like this when I first began doing research.
If this page isn’t here in the future, it’s because someone doesn’t want it here…and that’s probably Sallie Mae, student lenders or other banks. I’m going to leave it up as long as I possibly can, but it’ll probably get canned after 6 months. If it’s gone, then you know that you should use this information to your advantage. Companies like Sallie Mae have programs that scour the web to ensure no insider information or important advice or data is being released to the public.
Why am I posting this information? Because I’ve been through it all and I know people are suffering. It kills me that the very politicians we vote for won’t do the right thing and create protection laws for students. My advice is to keep moving forward with your life, hold your head high, be careful with the decisions you make…and eventually things will get better.
Oh, and for god sakes – make your social media profiles PRIVATE!!!
For the record, I don’t know if that email address will work. But I hope you found this article helpful! Message me if you want to know more, or share your story. Thanks!
origamiaround
2087
baratheonpilled
turnnoffyourmind
dailybridgerton
kianamaiart
tangentwithtanner
andulkaphoto
theartofmadeline
kaledo-art
