Sallie Mae CEO Sends Open Letter to Student Loan Consumers

Tim Fitzpatrick, CEO of Sallie Mae, the nation’s leading saving- and paying-for-college company, today sent the following message to student loan consumers:

Jan. 24, 2007

An Open Letter to Student Loan Consumers:

Are private-sector lenders and school financial aid officers helping students and families find the best "paying for college" solutions?

We have seen much debate on this important consumer issue in recent weeks. Let us take a look at the facts.

Financial aid officers nationwide work tirelessly to first help students find all the free money available, such as grants and scholarships, to help pay for college.  Most lenders, including Sallie Mae, invest millions of dollars each year to help schools spread that word.

If a student or family must borrow, financial aid staff and credible players in the lending community urge consumers to first take advantage of federally sponsored loans.  These subsidized loans provide the best rates and terms available.  The federal government protects borrowers by setting the maximum interest rate, fees and terms on these below market-rate loans.  Competition among lenders drives prices down further.

The majority of lenders now offer zero-fee Stafford loans. This saves students hundreds of dollars when they need it most — while they are in school.  Lenders pay these fees to the federal government on behalf of students with no strings attached.  In fact, Sallie Mae will provide nearly $175 million in fee reductions for students in this academic year alone.

Unfortunately, some lenders have attempted to blur what options are best for students.  For example, only a few remaining lenders charge students an origination fee on federally guaranteed Stafford loans.  Rather than paying this fee on behalf of students, these lenders tout back-end benefits that very few students — less than 10 percent — will ever realize.  If a student consolidates or makes even one late payment, they would lose these benefits, in contrast to zero fees, where the savings are immediate and guaranteed.

Schools work with lenders they trust and whose benefit programs are credible.  They help students and families sort through scores of marketing materials to help them find the best available financing. Schools also prefer to work with lenders who invest in service centers, planning-for-college web sites, loan delivery systems and other tools that save students and families time and money.  Financial aid directors are too sophisticated to succumb to marketing gimmicks and illusory product benefits.  These professionals ensure that students and families borrow only what they need, and deliver the most effective financial aid packages.

For decades, Sallie Mae and many other longstanding lenders in our industry have worked to provide innovative products, high quality service and competitive pricing to students and families.  We look forward to continuing that record of service.

Sincerely,

Tim Fitzpatrick
CEO, Sallie Mae