THE COLOR OF MONEY
Sallie Mae makes right decision to report data to all major credit bureaus
By Michelle Singletary
Sallie Mae, the nation's largest student lender, says it will send repayment history on its borrowers to all three major credit bureaus.
The decision comes just as some U.S. senators wanted to force the lender to fully report student loan information.
More than a year ago, Sallie Mae surreptitiously decided to report loan information on more than 7 million of its borrowers only to Equifax and to Innovis Data Solutions, a small credit bureau.
When Sallie Mae's policy was disclosed by Kenneth Harney, a nationally syndicated housing columnist, the lender argued that it was protecting its customers when it withheld loan data from Experian and TransUnion, the other big credit bureaus.
Sallie Mae — the student loan marketer otherwise known as SLM Corp. — said it didn't like the fact that Experian and TransUnion sell names to companies interested in marketing to its borrowers.
The Fair Credit Reporting Act allows for this practice — called "prescreening" — in which lists of consumers who meet certain credit criteria are sold to credit grantors.
Critics accused Sallie Mae of trying to hide their borrowers from competitors who might offer better loan deals.
Harney pointed out that some borrowers could end up paying more on their home mortgages if positive repayment history was absent from all three of their credit files. In fact, he reported that one Sallie Mae borrower's credit score dropped 40 points because of missing information about student loans, which resulted in a higher interest rate on his home loan.
I also wrote about Sallie Mae's policy, which unfairly penalized student borrowers who often have short credit histories and rely on positive student loan information to boost their credit scores.
Kathleen deLaski, chief communications officer for Sallie Mae, said the columns helped the company recognize the negative impact their policy might be having on its customers.
As soon as it can, deLaski said, Sallie Mae will begin reporting all borrowers' information to all three credit bureaus.
"Our goal is to ensure that our customers get the credit they have earned," Rose DiNapoli, Sallie Mae's vice president of government and industry relations wrote to Sen. Richard Shelby, R-Ala., chairman of the Banking, Housing and Urban Affairs Committee, and Sen. Paul Sarbanes, D-Md., the panel's top Democrat.
Sallie Mae has been negotiating with Experian and TransUnion to strike a deal in which the lender would feel more comfortable reporting borrower information, deLaski said.
Sallie Mae soon will send a communication to customers about the latest decision to report to all three bureaus.
"Until there is legislation that mandates full reporting by student lenders, there could be hundreds of other lenders potentially harming borrowers by not reporting their payment history," said Kate Rube, a higher education associate for the State Public Interest Research Groups, which are nonprofit consumer advocacy groups.
Sallie Mae is right. Borrowers should get recognized for the credit they've earned.
So Congress should make it mandatory that lenders fully report all student loan data to all three major credit bureaus.
While Michelle Singletary welcomes comments and column ideas, she cannot offer specific personal financial advice. Write Michelle Singletary, Washington Post Writer's Group, 1150 15th St. NW, Washington, DC 20071.
