Audit Says Sallie Mae Gave Illicit Incentives for Loans at Corinthian

July 15, 2010

Sallie Mae and Student Loan XPress gave illegal inducements to private student loan borrowers at institutions run by Corinthian Colleges Inc., the Education Department's inspector general said in an audit this week. According to the audit, Sallie Mae provided for parents of students at Corinthian institutions to get a "one-time $500 credit towards their closing costs of a new home loan" from the lender if the parent took out a parental student loan (known as PLUS) from Sallie Mae. The audit also uncovered inappropriate inducements made by Student Loan XPress, although the department concedes that a 2009 settlement with the lender may mean that it will not face further penalties. The inspector general urges the department's Federal Student Aid office to consider penalties against Sallie Mae, which disputes the IG's conclusions that the inducements were illegal.

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