With the economy at its worst, what are student loan lenders doing about this?
I’m assuming lenders like Sallie Mae should know that the payments are slowly coming in than usual due to the fact that people are getting laid off and jobs are scarce.
Now I have $25,000 in student loans. I’ve gone into deferrment for now since I’m only taking one class right now while I look for a job that I can start saving up to pay off my student loans.
I can’t keep defering the payments forever!
Miyoshi:
Like all lenders, Sallie Mae is experiencing a higher-than-usual delinquency rate on the loans it originated, and on the loans that it services for other lenders.
In the 4th Quarter of 2008, SLM’s 90-day delinquency rate rose to 2.6% of all outstanding loans.
I think some students have a tendency to forget what Sallie Mae is – the company is not a social service agency, or a government benefits program – it’s a business.
Coca-cola doesn’t give away free soft drinks to consumers because the economy is bad, and Allstate doesn’t insure your car for free. Dell won’t help you out with a free computer, and Starbucks isn’t inviting everyone by for free lattes on Thursday afternoons.
Sallie Mae is a lender – a lender with shareholders. Their product happens to be loans. Like all other businesses, Sallie Mae needs to bring in money, and it needs to pay its employees, its shareholders and its overhead. Despite what people tend to think, Sallie Mae is NOT a profitable business – Sallie Mae lost $243.3 million in the 4th Quarter of 2008 – a dramatic improvement from losing $1.64 billion in the 4th quarter of 2007.
Like a bank – Sallie Mae takes investors’ money and makes loans. They pay their investors back with the returns on their loans – and they take the repaid lending funds and make new loans available to additional students. When old borrowers don’t pay, Sallie Mae loses money in two ways – they lose on the original loan, and they can’t originate as many new loans.
I think you’re looking at this a little simplistically. “Well, doesn’t Sallie Mae know that we’re all struggling out here, so I’m thinking that they should be cutting us all a break”. Yes, the company knows that times are hard, and they’re seeing that in operating losses and delinquencies. But if you’re thinking that Sallie Mae can afford to be nice and cut everybody a little slack, and maybe forget about some of the money that people owe them, and give them a lot more time to repay – I’ll ask again – are Toll Brothers giving away free houses? Can you stay at Hilton for free? Has Disney made Saturday nights half priced?
How is Sallie Mae any different?
