Department Of Education Demands That Sallie Mae Repurchase Loans Made To Trade School Students

In a class action against a for-profit vocational school in Florida, we learned that the school lacked the resources to answer a judgment in our favor.  Accordingly, we joined note holder Sallie Mae to the case via the FTC Holder Clause in the students’ FFEL notes.  In discovery, we learned that Sallie Mae sold the majority of our students’ loans to the Department of Education (ED) in 2008 and 2009.  We then had to decide whether to join ED to the case via the Holder Clauses as well.  Since this would have created substantial delay, and potentially turned ED against us in a context where we thought it should join us, we sought to persuade ED to “put” the notes back to Sallie Mae pursuant to provisions in the agreements governing the sale of the loans.  ED ultimately did just that, and demanded that Sallie Mae repurchase all our students’ notes.  We believe this is the first instance where ED has demanded a student loan note holder to repurchase notes as a result of consumer litigation.

To see ED’s letter rescinding the loans and demanding repurchase, click this link:  14.7.23 Ayanian to Rieg ED rescinds Sallie Mae loan purchase ltr

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