RESTON, VA – SLM Corporation, commonly known as Sallie Mae and the nation’s leading provider of education funding, announced that it has settled a lawsuit originally filed by College Loan Corporation in September 2002.
The lawsuit challenged Sallie Mae’s practices in interpreting the single holder rule, which provides that borrowers who have a single lender under the Federal Family Education Loan Program (FFELP) must first seek a consolidation loan from that lender. A jury ruled in favor of Sallie Mae on all counts in July 2003, but in January 2005 the United States Court of Appeals overturned the jury verdict and remanded the case for a new trial.
The settlement agreement includes a $14 million payment by Sallie Mae, net of an insurance payment. The agreement does not constitute any admission of liability by Sallie Mae and does not require Sallie Mae to change its current practice related to the single holder rule, absent any legislative or regulatory change.
“We are pleased to conclude this matter without the disruption, expense and uncertainty that accompany such litigation, and we look forward to continuing to serve all of our borrowers who wish to obtain FFELP consolidation loans,” said Robert Lavet, Senior Vice President and General Counsel of Sallie Mae.
The settlement payment will be reflected in Sallie Mae’s second-quarter 2005 earnings.
