How I Beat Sallie Mae in Court ... 4 Times

One of the worst things that can happen to a new graduate is to leave school with no job and tens of thousands of dollars in private student loan debt. Stefanie Gray knows this from firsthand experience, which she recounted in a blistering column for The Guardian.

The subject of her ire? Sallie Mae. In her column, Gray says the company “sold me predatory loans — and tried to ruin my entire future in the process of collecting them,” because she finished her master’s degree facing unemployment, and she had no way of adjusting her payments, and Sallie Mae required a $150 fee every three months to put her loan in forbearance, which wouldn’t go toward the interest or principal balance. She called it an “unemployment penalty fee,” and in 2012 started a petition to reverse it. As a result, the company started applying the fee to borrowers’ balances, Gray wrote. A Navient spokeswoman (student loans made through Sallie Mae are now serviced by Navient, a separate company created in October) said she could not comment on an individual customer, for privacy reasons. She sent the following statement from Navient to

“When our private education loan customers fall on difficult times, we work with them to understand their financial circumstances and offer customized assistance using a variety of tools, such as temporarily suspending the requirement to make payments, offering a payment catch-up program, or reducing the interest rate and extending the term. We began offering a private education loan modification option in 2009, and currently have more than $2.1 billion in private loans enrolled.”

Gray said she had no way to lower her monthly payments, so she defaulted on her $36,000 of student loans, which had grown to $77,000 within three years of graduating. She said Sallie Mae filed four lawsuits against her, in an attempt to collect the unpaid sum. Gray fought back, and in a somewhat bizarre twist, the judge dismissed the lawsuits, because in three of the cases, the entity suing her wasn’t registered to do business in the state of New York, and the fourth case was brought by an entity that seemingly didn’t exist.

If Sallie Mae had won a judgment against her, she would have faced wage garnishment and a dismal credit rating (though defaulting likely already hurt it, considerably). Gray wrote she was relieved it didn’t end up that way, but the fact that her misfortune unfolded as it did frustrated her: Before she defaulted, she said she tried to negotiate with Sallie Mae to pay what she could, but the lender was rigid. It’s a huge downside to borrowing from private lenders.

Federal student loan borrowers may qualify for programs like income-based repayment, loan forgiveness, forbearance or deferment, sometimes making it easier for borrowers to move through hardship without defaulting on their education debt. Missing any kind of loan payment seriously hurts credit scores, and student loans are particularly problematic because they’re rarely dischargeable in bankruptcy. To monitor how your student loans affect your credit standing, you can see two of your credit scores for free, with updates every 30 days, on

As soon as you feel you’re unable to make your student loan payments, research your options and reach out to your loan servicer to see if there’s any way to make your payments more affordable. Unfortunately, you may end up in a situation like Gray’s, but it’s worth the effort to try and avoid the grave financial consequences of default.

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Christine DiGangi covers personal finance for Previously, she managed communications for the Society of Professional Journalists, served as a copy editor of The New York Times News Service and worked as a reporter for the Oregonian and the News & Record.