IMPORTANT::Sallie Mae Torments Faithful Student Borrowers After Co-Signers Die

IF YOU ARE A CO-SIGNOR ON A SALLIE MAE HELD STUDENT LOAN (OR KNOW SOMEBODY WHO IS) THIS IS AN IMPORTANT READ!!

Seven borrowers who had been paying their Sallie Mae student loans on time for years were unexpectedly threatened with asset seizures after a Sallie Mae contractor demanded they immediately repay tens of thousands of dollars simply because a family member had died.

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All were victims of what the Consumer Financial Protection Bureau calls “auto-defaults,” or the largely legal practice of immediately declaring borrowers’ private student loans in default after the death or bankruptcy of a loan co-signer.

Since an April report by the CFPB highlighted the troubling practice, the financial services industry has spent four weeks on the defensive, arguing that borrowers who face the demands are often delinquent on their debts, or are just out of college and thus unable to shoulder the burden. What’s more, they argue, borrowers should’ve known they could face auto-defaults because it’s detailed in their loan contracts.

But the experiences of seven Americans, who independently contacted The Huffington Post to share their stories, documents, correspondence and conversation notes detailing their interactions with Delaware-based Sallie Mae and its debt collector, Simm Associates, suggest that the practice ensnares even good borrowers who have faithfully repaid their student loans on time for years.

Seemingly out of nowhere, they’re treated like deadbeats and face financial ruin based on what seems to them an arbitrary demand to immediately pay up.

“Co-signer issues like auto-defaults are another example of predatory practices by private lenders,” said Anne Johnson, executive director of Generation Progress, a Washington advocacy organization linked to the Center for American Progress.

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Christopher Kibler filed complaints with the federal consumer bureau and attorney generals in Delaware and Illinois. In response to his complaint with the CFPB, Sallie Mae said it would recall his loans from Simm Associates.

Kibler, who said what Simm and Sallie Mae put his mother through was “morally repugnant,” told other borrowers that in order to beat back Simm and Sallie Mae, they had to file complaints with government authorities.

Keller took Kibler’s advice. She researched Simm on the Internet, then filed complaints with the federal consumer bureau and New York attorney general. Simm responded to the complaints.

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“I would not recommend anyone do business with Sallie Mae,” said Wayne Saxe, Karen’s husband. “The company’s business practice is to target the spouse of the deceased, and to pick on the weak and the poor.”

Both the Terrays and the Saxes said they were fortunate to have jobs that enabled them to dedicate hours to calling Sallie Mae and Simm and to research their situations.

“If we didn’t have that flexibility," Wayne Saxe said, "we would’ve been screwed in a very profound way."

Sallie Mae Torments Faithful Student Borrowers After Co-Signers Die