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By CATHERINE TUMBER  |  July 25, 2011

• Sallie Mae is able to buy up so many student loans originally made by other companies because all banks are free to sell. However, some — called "make and hold" lenders — have a track record of hanging on to their loans. If you take out a student loan with a "make and hold" lender, you could have greater control over it in the years ahead, including more loan-consolidation choices, and you won't even pay more in fees and interest. Not surprisingly, Sallie Mae is one of the biggest "make and hold" lenders; the other two are Citibank and Wells Fargo, but there are lots of smaller banks that tend to keep their own loans, too.

• Many schools work with a "preferred lender" to whom they try to steer students in need of education loans. You are not required to work with the school's preferred lender, however, and if you are told you must, your financial-aid officer is breaking the law.

Much of what Sallie Mae does may be legal. That's why regulatory reform of the student-loan industry is necessary. Congress and consumer advocates are currently considering several types of legislation that, if you're concerned about this issue, need your support.

Higher Education Act of 2004: approximately twice a decade, the HEA is reauthorized by Congress, and this time around a large number of organizations are pushing for reform of its student-lending regulations. Of those seeking to preserve both the federally guaranteed and the direct student-loan programs, the American Association of State Colleges and Universities recommendations are among the most comprehensive, although they are still under development. See this site.

Student-loan late-fee initiative: the State PIRGs' Higher Education Project is currently looking into pushing for tighter regulations on late fees in the HEA-reauthorization process. If you have had a troubling personal experience with this matter, the project wants to hear about it: contact Kate Rube at And see the State PIRGs' HEA-reauthorization recommendations.

Student-loan-consolidation legislation: the House Committee on Education and the Workforce is considering two types of legislation to give student borrowers more options to reconsolidate under the HEA. HR 2505, among other versions, urges amending the HEA to change the rule that permits student borrowers to consolidate their loans only once. HR 942 would do away with the HEA's single-lender rule, which today forces so many borrowers to consolidate only with Sallie Mae.

Reform of state laws governing mandatory arbitration, based on the model provided by the National Consumer Law Center. See this site.


If you have received a letter from Sallie Mae indicating that your monthly payments will go up due to a computer-installation error, and you can't afford the increase, you should take the following steps.

1) Call the dedicated line established by the company for these complaints: (800) 890-9798. 2) Explain your situation, then make sure you're put through to a supervisor. 3) Ask to enter into a reduced-payment agreement, one that does not involve paying more interest — either through capitalization or extended payments. 4) If you are asked to sign a forbearance form, make sure it states in writing that interest capitalization will be waived. 5) If Sallie Mae makes none of these options available to you, contact your US senator or representative and ask him or her to assist with your request.

Read the rest of Catherine Tumber's articles at her author page.

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