Sallie Mae Rescinds Forbearance Fee Policy. Sign of Good Things to Come?
According to a recent New York Times article*, Sallie Mae has recently changed their fee policy for unemployed student loan holders. The former policy charged a $50 unemployment penalty for every 3 months to people who couldn’t afford a regular monthly payment—even while interest charges piled up. The fee was referred to as a “good faith deposit,” although it was never applied to either the balance or interest of the loan—nor was it ever refunded.
Frustrated with the fees, New Yorker Stef Gray started a petition with Change.org** aimed at stopping the penalty. The petition attracted over 77,000 signatures—and caught Sallie Mae’s attention. The company will still charge the fee—but it will apply it to the customer’s balance after the re-establishment of regular payments. It’s not a complete victory—but it’s a good start.
And it might be a sign that financial organizations are finally starting to sit up and take notice of consumer frustration. Before the Sallie Mae petition, Bank of America cancelled a plan to charge a $5 monthly fee for debit card use.
Student loan borrowers are not out of the woods yet. Federal student loan interest rates are set to double this year
Occupy Wall Street may be able to claim some of the credit for fueling and helping to focus consumer ire over what many people see as perverse and unreasonable fees and charges. So can other unrelated movements and events, such as Bank Transfer Day—a movement to encourage people to switch accounts from commercial banks to nonprofit credit unions en masse on November 5, 2011.
Between September 29—the day Bank of America announced its new fee—and November 2, the credit union industry reported receiving over $4.5 billion in new deposits and 440,000 new customers, boosting new accounts by 50%. And on the day of November 5, about 40,000 people signed up for credit union accounts according to the Credit Union National Association***. Those numbers may not be much to JPMorganChase executives—but they may be enough to send a message.
A speech by Barack Obama show that he has also been listening to frustrated student loan holders and consumers. After the We the People Petition entitled “Forgive Student Loan Debt to Stimulate the Economy and Usher in a New Era of Innovation, Entrepreneurship and Prosperity” attracted thousands of signatures, President Obama introduced new legislation attempting to make it easier to consolidate loans, lowering the minimum payment limit for borrowers who qualify, and reducing the length of time to qualify for loan forgiveness from 25 to 20 years.
Still, student loan borrowers are not out of the woods yet. Federal student loan interest rates are set to double this year. And with a Congress bent on cutting government spending, it’s possible many student aid programs will be slashed in the future—including those that affect current borrowers. While there have been some strides made in establishing more fair banking practices, chances are it will take much more protest and activism to inspire widespread and lasting change in the financial industry.
*New York Times: Sallie Mae to Change Forbearance Fee Policy
**Change.org: Tell Sallie Mae: Stop the Unemployment Penalty
***Credit Union Nation Association
New York Times: In Retreat, Bank of America Cancels Debit Card Fee
PBS.org: Banks Cancel Debit Card Fee, but Anti-Bank Sentiment Remains Palpable
Washington Post: Are Big Banks Feeling Pressure from Occupy Wall Street?
Raw Story: Bank’s Leaked Email Admits ‘Occupy’ Movement ‘Could Impact Our Industry’
More About Understanding Student Loans
- Credit Repair Services You Should Never Pay For
- Questions You Should Ask Before Applying for Student Loan Forbearance
- The Bank on Students Act: What It Is, and How It Could Help Student Borrowers
- How the Death of a Co-Signer Can Affect Your Student Loan
- Peer-to-Peer Student Loans: What They Are, and How They Can Help You Pay for College
- If You're Unable to Work Because of a Disability: What Happens to Your Student Loan?
- New Rules for Debt Collectors: How They Could Affect Your Student Loan
- Having Trouble Repaying Loans? The Department of Education May Be in Touch