Congressional probe of student loans widens

Thu Apr 26, 2007

Congressional investigators probing the $85 billion student loan market pushed into new areas on Thursday by raising concerns about collection tactics and seeking an inquiry into possible conflicts of interest inside the U.S. Education Department.

Edward Kennedy, chairman of the Senate education committee, wrote to the heads of two major student loans firms expressing concerns about allegedly abusive loan collection tactics.

"I am concerned that several private lenders may be engaging in harsh and inappropriate tactics with regard to borrowers whose payments are overdue ... tactics that are prohibited by federal law and regulations," Kennedy wrote in a letter to Tim Fitzpatrick, chief executive officer of Sallie Mae, the nation's largest student lender.

Senate investigators have obtained information indicating lenders may have told a borrower's spouse that the borrower would go to jail if he did not pay, which is "a blatantly false assertion," said Kennedy, a Massachusetts Democrat.

Investigators are also looking into whether lenders have refused to negotiate with borrowers on payment deferment, called borrowers on the job after being told to stop, harassed borrowers' neighbors, family and co-workers and used profane language to intimidate borrowers.

Kennedy asked Fitzpatrick to provide information about Sallie Mae's collection practices under the federally guaranteed student loan system.

Resource: http://www.reuters.com