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Glitch forces increase in 800,000 student loan payments
(AP) -- A computer programming error has forced Sallie Mae, the nation's largest provider of student loans, to increase the monthly payments of 800,000 borrowers.
Letters informing the borrowers of the increase went out this week from company headquarters in Reston, Virginia. Sallie Mae spokeswoman Kathleen deLaski said Wednesday the company expects 90 percent of the monthly increases to be $40 or less. The average increase, she added, should be $25 per month. "It is our error and we're sending out letters apologizing for it," said deLaski. The readjustment will affect borrowers with consolidated, or 10-year loans with variable rates -- similar to adjustable rate mortgages. The miscalculation will not impact the other 6.2 million student loans owned or managed by Sallie Mae, deLaski said. She attributed the problem to an "installation error" that resulted in the entry of improper interest tables into company computers. The mistake resulted in a payment schedule that didn't match the total amount of principal and interest owed by the borrowers. "The people who noticed it on the borrower's side were near the end of the term and realized that there was a mismatch between how much they had to pay and how much time was left to pay," deLaski said. The spokeswoman said borrowers unable to pay the extra amount added to their monthly payments may apply for a loan extension. As a "good will gesture," deLaski said borrowers will receive credit from Sallie Mae for any extra interest charged to their accounts. She estimated the cost of the credit will be $8 million. The problem did not result in borrowers paying amounts that exceed the terms of their original loan and interest agreements, she said. Copyright 2003 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
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