Arne Duncan and U.S. Department of Education to Renew Student Loan Contract with Sallie Mae Despite Allegations of Wrongdoing!

Dear Commons Community,

Student loan giant Sallie Mae is currently under fire from lawmakers, federal regulators, consumer groups and student advocates for allegedly violating numerous consumer protection laws. The company is facing accusations that it cheats soldiers on active duty, engages in discriminatory lending, pushes borrowers into delinquency by improperly processing their monthly payments, and doesn’t provide enough aid to borrowers in distress. Regardless, as reported in The Huffington Post:

“…to the Department of Education, Sallie Mae remains a trusted partner. In a previously unreported Oct. 25 letter, the contents of which were described to The Huffington Post and confirmed by the Education Department and by Sallie Mae, the agency said that it is moving to renew the student loan servicer’s federal contract, which is currently set to expire in June.

The new contract, which would run through June 2019, is potentially worth hundreds of millions of dollars. Last year, Sallie Mae recorded $84 million in revenue from its Education Department contracts.

News that a company under investigation for harming student borrowers soon will be rewarded with more taxpayer-provided business comes at a particularly fraught time for the Education Department, which is battling accusations from lawmakers, consumer groups and student advocates that it has coddled and refused to punish a company with a history of alleged transgressions.

The agency has yet to respond to a Sept. 19 letter from Sen. Elizabeth Warren (D-Mass.) criticizing it for its apparent inability to hold Sallie Mae accountable, despite what Warren described as a “pattern of breaking the rules and ignoring its contractual obligations.”

If Sallie Mae’s past actions have not warranted an end to its federal contracts, Warren asked Education Secretary Arne Duncan, under what circumstances would the department terminate a contract with a law-breaking company?”

The U.S. Department of Education under Arne Duncan continues to dumbfound those who follow higher education policy in this country.  Earlier this year, Congress scolded the Department for reaping billions of dollars from student financial aid programs and now it is getting ready to renew a contract with a company  fraught with problems if not scandal.



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