Private student lender Sallie Mae is changing how it handles a fee it charges struggling borrowers who seek to temporarily suspend payments.
Sallie Mae isn’t cancelling the $50 fee, but said it will now apply the money toward the borrower’s loan balance if on-time payments are resumed for six months in a row.
The change came after an online petition asking the company to drop the fee collected more than 77,000 signatures on Change.org. The site also hosted petitions last year that targeted Bank of America and Verizon; both companies ended up scrapping plans to charge new fees citing widespread public feedback.
The fee from Sallie Mae isn’t new, but has taken on added significance at a time when unemployment remains elevated at 8.5 percent.
Borrowers who are unemployed or suffering economic hardship can apply to temporarily suspend payments on both private and federal student loans. The idea is to keep their credit history in good standing, although the loans still accrue interest.
Federal student loans do not charge to defer payments.
Sallie Mae, formally known as SLM Corp. approves forbearance requests in three-month periods. Students can seek forbearance on up to three loans at a time for a cost of $150. If the borrower still isn’t on solid financial footing when the period ends, they can request another three months of relief.
Previously, Sallie Mae did not apply the fees against loan balances. The company says the new policy will be retroactive to forbearances granted started Jan. 1.
The company said that the fee was meant to acknowledge “the importance of and commitment to resuming payments.”
Sallie Mae says that only 4 percent of its loans are in forbearance and that the vast majority of those borrowers eventually begin repaying their loans. The company also notes that it encourages borrowers to first consider a modified payment plan, which can be requested without incurring a fee.
Modified payment plans lower monthly payments, but drive up the total loan amount because interest continues to accrue.
