MyRichUncle President and Co-founder Raza Khan wrote a letter to Sallie Mae's CEO Timothy Fitzpatrick in response to Sallie Mae's letter to CBS Evening News about its March 16 coverage of New York State Attorney General Andrew Cuomo's student loan industry investigation.
In the letter, Khan charges that Sallie Mae's letter was a "misguided effort to discredit both competition in the student loan market and [MyRichUncle's] public call for change."
Khan also states that the background Sallie Mae provided on MyRichUncle is "without merit, baseless and lacks relevance to the issues that were brought to light by the New York State Attorney General's office." He writes that Sallie Mae made false and misleading statements about MyRichUncle's borrower benefits.
Khan concludes by urging Sallie Mae to make sure it gets the facts right and notes that the loan industry is in for inevitable change.
The text of the letter is below.
Mr. Timothy Fitzpatrick
CEO
SLM Corporation (Sallie Mae)
12061 Bluemont Way
Reston, VA 20190
Dear Mr. Fitzpatrick,
I am writing to correct misstatements that your Vice President of Corporate Communications, Tom Joyce, publicly released on March 20, 2007.
Your misguided effort to discredit both competition in the student loan market and our public call for change showcase Sallie Mae's irresponsible behavior as an organization that does not have students' interests in mind.
Case in point: your letter baldly states that "[c]ongress sets the rates on guaranteed student loans -- currently a fixed 6.8 percent ... "
The Federal Trade Commission should sanction Sallie Mae for this statement. In your capacity as the CEO of Sallie Mae, you must know that Congress only sets the maximum rate of interest and that our companies are quite free to provide students with loans at less than the maximum rate allowable by law. I do not believe that Congress had any expectation that you and others in the market would fuel the myth that this is a government-set rate of interest.
As a general point, I have to say that I am a bit surprised at how much attention you are paying to MyRichUncle. It is curious to me that Sallie Mae reacts so vehemently and venomously to the voice calling for more competition in the industry.
I will grant you that competition, outside of the protected cocoon of the government charter you used to enjoy, can be fierce. It is unfortunate that you have chosen to deal with it by engaging in a smear campaign that is an obvious effort to divert attention from the true problems of the industry.
The so-called "background" Sallie Mae provided on MyRichUncle in their letter to CBS Evening News is without merit, baseless and lacks relevance to the issues that were brought to light by the New York State Attorney General's office.
Sallie Mae made false and misleading statements about our borrower benefits, as it has done in the past, with the assertion that MyRichUncle " ... offers discounts that less than 10 percent of students will ever earn."
With MyRichUncle, 100 percent of students receive the upfront benefit of a
one percent interest rate reduction from the start of repayment on federal
Stafford loans, which they have the right to keep, no matter if payments
are late or forbearance is requested, for the life of the non-defaulted
loan.
That 10 percent number is yours and, quite frankly, you can keep it. It
was you, in fact, who put out a statement recently citing the 10 percent
figure with respect to the students who receive benefits from various loan
programs, including your own.
Sallie Mae claimed that we began as a protein bar company.
Better research would have allowed you to glean an accurate understanding
of our origins. My co-founder and I started this company in 2000 with the
sole purpose of innovating to help students' financial futures and we have
done so in a variety of ways, none of which involved synthesizing amino
acids. We did a reverse public merger in 2004 with a company that had
several innovative businesses, including CD manufacturing and protein
bars, however the resulting entity, MRU Holdings, Inc., has focused on
education finance and has never itself been in the protein bar or CD
businesses. Not that there's anything wrong with entrepreneurial
businesses -- not all companies get to start life as a government-
sponsored enterprise funded by taxpayers.
Sallie Mae alleged that we have " ... spent millions of dollars ... " on ads attacking the integrity of financial aid administrators and lenders.
We have not spent millions attacking anyone's integrity. As a matter of
fact, our advertising has invited students to ask informed questions
before making borrowing decisions which have important financial
ramifications. We advertise to consumers, plain and simple, with a plea
that they educate themselves. Though it is telling that you interpret our
efforts to get students to ask informed questions as an attack.
Sallie Mae chose to respond to the CBS News story by criticizing our CEO, Edwin McGuinn.
This bizarre attack is not relevant to MyRichUncle or factually accurate
as to Mr. McGuinn. For the sake of accuracy, that company was a technology
company with a patented platform for the sale of state lottery tickets
online. You have also chosen to make a contrived effort to tar that
company with political corruption by convoluting the facts regarding that
company's dealings with Preston Gates & Ellis LLP, a highly reputable firm
where Jack Abramoff was employed. The investigations involving Mr.
Abramoff never found anything problematic with Mr. McGuinn or the
company's business.
Rather than stepping outside yourself, you prove that you are not thinking about fixing the ills of this industry at all. Instead, you jump to the defense of the entire community of financial aid administrators, at least some of whom are acknowledged to be bad apples, which suggests that close, improper ties do indeed exist to the detriment of students. Students and parents deserve better from you and our industry as a whole.
I would like to offer a few ideas, which I am hopeful you will receive in the open spirit in which I offer them:
- It is undeniable this industry is in for change. You should lead,
follow or get out of the way.
- Hire communications people who get the facts right. Inflammatory,
categorically incorrect statements only fuel the public's poor
perception of you while piquing the interest of legislators, regulators
and enforcement bodies.
- Don't knock proteins -- they are part of the building blocks for a
healthy body. If you choose to go in our direction of reforming the
industry, you may be able to get them without eating crow.
Raza Khan
President & Co-founder
MyRichUncle
Posted 03/23/07 to www.NASFAA.org. Please submit Web Site questions or comments to Web@NASFAA.org
