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Sallie Mae Expects Student Loan Write Offs To Increase In 2009

Sallie Mae Expects Student Loan Write Offs To Increase In 2009


I just read an article in Newsweek that says Sallie Mae expects their private student loan write offs to increase in 2009. Wow, color me surprised! NOT!

With the economy the way it is, or the way the National Media says it is, many students are up and letting their student loans go into default. They keep the snazy apartment, the $300 a month cell phone, the big screen TV and the $800 a month car, but they let the student loan go into default. These people are really going to be feeling the pain of that stupid decision on down the road.

For one thing, if you have a Government backed student loan, they will get that money out of you. One way or another. Uncle Sam doesn’t forget about loans that he’s backed. They’ll send everyone and their brother after you, including the IRS.

Got plans like going on vacation for that big tax return check? Forget it, Uncle Sam is going to take it. They can garnish your wages and tax returns until the loan is paid in full. Looks like you’ll be filling the kiddie pool you got from Wal-Mart for your vacation.

Just started a Family and looking to buy your first house? Ooops, up pops that defaulted student loan. Even if you now qualify, which is a toss up, you’re going to be paying out the yazoo in higher interest rates because of your bad decision to let those student loans go into default.

Trying to land that high paying job? Uh Oh, the company just did a credit check and guess what…they don’t hire people with defaulted student loans on their credit record. Looks like you’ll spend more time in that luxurious cubicle of yours.

Oh, I hear what you’re saying. You have a private student loan! Well, geez, that changes things. Now you’ll only be hounded by collection agencies for the rest of your life. You can still be sued and have your wages garnished, your credit blemished for a decade or more plus this also will go on your credit record. Smart move on your part! NOT!

Anyway, the article goes on to say they expect the impact of the economic downturn to be offset by tightening credit requirements. What they’re saying here is that they’ve tightened the qualifications to get one of their private student loans. Something they should have been doing all along.

Sallie Mae is also increasing it’s deposti base by $1 billion since Sept. 30th. Here’s a little quip from Newsweek;

Sallie Mae, the biggest player in the $85 billion-per-year student-loan market, also said it expects to originate $20 billion in FFELP loans in the 2008-2009 academic year. The FFELP, or Federal Family Education Loan Program, allows private sector companies — such as Sallie Mae — to market and lend federally guaranteed loans.

Sallie Mae assured profitability on FFELP loans through 2010, noting that a Department of Education facility will provide for unlimited funding of new FFELP originations through the next academic year.

As strains in the credit markets pushed the lender’s funding costs higher, Sallie Mae received $3.6 billion in funds from the Education Department in the third quarter under the government’s program to provide liquidity for new federally guaranteed student loans.

Sallie Mae also said it expects to fund a portion of its existing portfolio through TALF, or the term asset-backed securities loan facility administered by the Federal Reserve. The Fed will make up to $200 billion of loans under TALF.

Sounds like they landed on their feet. Good to see my tax dollars at work.

So what does this mean for the Average Joe College Student looking for a student loan? It means you’d better clean up your financial mess if you want a loan from Sallie Mae! She’s been burnt once and she’s not taking on bums anymore.

sallie mae private student loan write offs

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