House Republicans' vision for tax reform would consolidate tuition tax breaks into a single, more refundable credit -- but end benefits for student borrowers, repeal deduction for those who purchase football tickets, and tax the cherished tuition remission for college employees.
Sallie Mae’s loan servicing operations will soon be housed in a separate business entity called Navient, the company announced Tuesday.
As it first disclosed last year, Sallie Mae--formally known as SLM Corp.-- is in the process of splitting up into two distinct companies: Navient and Sallie Mae.
Navient, starting this fall, will service most of Sallie Mae’ existing private student loan portfolio and also assume responsibility for Sallie Mae’s contract with the U.S. Department of Education to manage the payments of federal student loan borrowers.
The company’s consumer banking business will continue under the name Sallie Mae and will originate new private student loans and service those loans.
Sallie Mae is the largest servicer of the federal government’s portfolio of direct student loans, with some 5.7 million accounts.
The Education Department also issued guidance Tuesday about the changes, which will begin to affect borrowers this fall. The department described the impact on federal student loan borrowers as “minimal.”
Federal borrowers whose accounts are currently managed by Sallie Mae will be able to contact Navient at the same phone numbers and mailing address, but they will need to log on to their accounts at a new website. In addition, borrowers will have to write checks using the new name and change any online bill paying services. A borrower who has set up automatic debiting from a bank, however, no action will be required, the department said.
Sallie Mae said in a statement that those borrowers would receive this spring and summer “personalized information about their account and any changes needed to ensure a smooth transition.”
The company’s split comes as its student loan servicing practices have come under scrutiny from federal regulators, several members of Congress and consumer advocates. Sallie Mae is facing multiple inquiries over how it applied the loan payments of military servicemembers, who are entitled to special borrower benefits.
Sallie Mae has disclosed to investors that it set aside $70 million, as of the end of 2013, to cover the “expected compliance remediation” relating to those inquiries.
Consumer advocates, Senator Elizabeth Warren of Massachusetts, a Democrat, have also complained that the Education Department is too lax in its oversight of how Sallie Mae services federal loans.
A group of state attorneys general, led by Illinois Attorney General Lisa Madigan, are also probing the company’s debt collection, loan servicing and other practices.
Several states are considering plans to make community college free. In Maine, Rep. Mike Michaud, a Democratic gubernatorial candidate, has a different idea: He has proposed making the sophomore year free for Maine residents at all University of Maine campuses, The Bangor Daily News reported. The idea is to change patterns in the sophomore year, when many drop out, and when many families' savings run out. The plan would cost the state $15.1 million a year.
SLM (better known as Sallie Mae) is facing increasingly broad investigations from state and federal agencies, The Wall Street Journal reported. Illinois, under Attorney General Lisa Madigan, is leading several states in examining Sallie Mae's debt collection and loan servicing.
Clark University, in Massachusetts, has dropped need-blind admissions, in which applicants are admitted regardless of their ability to pay, MassLive.com reported. Going ahead, the university will become "need-aware" at the end of its admissions process, meaning that once the financial aid budget has been spent, applicants who can afford to pay will be admitted. Officials said that they remained committed to admitting low-income students, but that the need-blind policy had forced Clark to make cuts in other parts of its budget, and was no longer sustainable.
Congressional investigators said in a report Tuesday that they could not determine whether students' increased access to federal loans in recent years has caused college prices to rise.
The Government Accountability Office was tasked with analyzing what, if any, impact higher federal loan limits that took effect in 2008 and 2009 have had on the rising price of college. In its report, the GAO concludes that "it is difficult to determine if a direct relationship exists between increases in college prices and the [federal] loan limit increases because of the confluence of many other factors that occurred around the time the loan limit increases took effect," such as the economic recession and increases in other types of federal, state and institutional aid available to students.
The report also notes that the increased federal loan limits were correlated with a drastic drop, by more than 50 percent, in private student lending. A variety of factors explain that drop, the report says, including more stringent lending criteria, new consumer protections on private loans, and colleges' efforts to steer students away from private loans.