The U.S. Department of Education has declined to levy any fines on student loan giant Sallie Mae despite secret determinations over the past 10 years that allege the company has harmed borrowers, incorrectly billed the department and had other servicing failures.
The allegations, detailed in a Dec. 9 letter from the Education Department to Sen. Elizabeth Warren (D-Mass.), for the first time provide a glimpse into the extent of problems plaguing the $1 trillion federal student loan portfolio, and the apparently lackluster department response to faulty behavior by companies that interact with borrowers on its behalf and collect payments on government-backed student debt. The letter was obtained by The Huffington Post.
The findings come as Education Secretary Arne Duncan battles accusations that his department tolerates wrongdoing by companies it pays to service federal student loans, most notably Sallie Mae. The nation’s largest handler of student debt, Sallie Mae is under investigation by at least three federal agencies for allegedly violating borrowers’ rights. At least one of them — the Federal Deposit Insurance Corporation — has told Sallie Mae it intends to publicly accuse the company of harming borrowers.
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