Sallie Mae spokesperson Tom Joyce insists that the company doesn't pyramid fees (though he cannot explain how else someone's late-fee balance could consistently show up as zero, when in fact that person was being charged every month); nor, he says, does it charge duplicate fees for one late payment. That's why, he says of Washkoviak, which is now under appeal, "We will win that lawsuit." Whether or not he's right about the facts in the case, given the HEA's Swiss-cheese-like regulations on late fees, he may well be right about legal victory.
Sallie Mae's aggressive tactics don't stop with the questionable tacking on of late fees. Nor are such tactics confined to its federally guaranteed student-loan business. During the late 1990s, the lender began making what culminated in approximately 300,000 private loans — regulated not by the HEA but by state and federal consumer-protection and banking laws — to students attending the hundreds of computer-training schools that had sprung up throughout the country during the peak of the dot-com economy. Many of these schools, however, lacked proper state licensing, and therefore Sallie Mae should not have been in business with them. Schools that aren't properly licensed, after all, can go out of business overnight and leave students high and dry. Mark Powell, of Alexandria, Virginia, was one such student. An auto-parts clerk, Powell enrolled, on June 10, 2002, in a school called Ameritrain, which ran seven computer-training facilities in five states. Upon completing classes, students were supposed to receive a certificate permitting them to take tests for certification in a variety of commercial software; the school was also supposed to provide job-placement services. But on August 7, when he showed up for class with just four days left in his eight-week program, Powell found that the school had been closed up overnight. "The doors were locked, the lights were out, all the stuff was gone," he says.
When Powell and several others contacted Sallie Mae's school-closings department, on August 8, to try to learn more, no one called back. It took a while, but a local consumer-advocacy group finally discovered that Ameritrain filed for bankruptcy on September 26. So on December 4, the intrepid band of stiffed borrowers — whose number had grown to nearly 300 of the 500 students at Powell's facility — attended the mandatory creditors' meeting conducted by the US Justice Department in the event of bankruptcy. It was here that they learned that Sallie Mae did not view itself as a "creditor." As Powell recalls, Sallie Mae's representative told them, "This is between you and Ameritrain." In other words, Sallie Mae had every intention of collecting on the students' misfortune.
After hiring an attorney to organize a class-action suit, they learned that Ameritrain was not fully licensed to offer its educational services and that Sallie Mae had made loans to students enrolled in many other unlicensed computer schools. They also found that they could not file a class action because the promissory notes they'd signed on their loans prevented them from doing so; their only recourse was to go to "mandatory arbitration," with no right to a jury trial and no further means of appeal through the courts (an increasingly common and "devastating" industry practice of which most people are unaware, according to an NCLC consumer alert. See www.nclc.org/initiatives/arbitration/shtml). Before long, in a bid to further deprive the borrowers of legal recourse, Sallie Mae sent out a "Request for Partial Loan Discharge" form to the students, which would make them responsible only for those classes they'd taken on condition that they give up all claims to recover their losses and win damages, as well as forfeit their right to an attorney.