NEW YORK — The private student lender Sallie Mae is changing how it handles a fee charged to struggling borrowers who seek to temporarily suspend payments.
Sallie Mae isn't cancelling the $50 fee, but said it will now apply the money toward the borrower's loan balance once on-time payments are resumed for six months in a row.
The change came after an online petition asking the company to drop the fee collected more than 77,000 signatures on Change.org.
Borrowers who are unemployed or suffering economic hardship can apply to temporarily suspend payments on both private and federal student loans. The idea is to keep their credit history in good standing, although the loans still accrue interest.
Federal student loans do not charge to defer payments.
Sallie Mae, formally known as SLM Corp. approves forbearance requests in three-month periods. Students can seek forbearance on up to three loans at a time for a cost of $150. If the borrower still isn't on solid financial footing when the period ends, they can request another three months of relief.
Previously, Sallie Mae did not apply the fees against the balance of loans. The company says the new policy will be retroactive to forbearances granted started Jan. 1.
"We've been looking at this for some time, and the petition confirmed there was an appetite for this modification," said Patricia Christel, a spokeswoman for Sallie Mae.
The company said that the fee was meant to acknowledge "the importance of and commitment to resuming payments."
Sallie Mae says that only 4 percent of its loans are in forbearance and that the vast majority of those borrowers eventually begin repaying their loans. The company also notes that it encourages borrowers to first consider a modified payment plan, which can be requested without incurring a fee.
Modified payment plans lower monthly payments, but drive up the total loan amount because interest continues to accrue.
The petition on Change.org asking Sallie Mae to drop the fee had more than 77,000 signatures Thursday afternoon. The site also hosted petitions asking Bank of America and Verizon to drop planned fees; both companies ended up scrapping the fees citing widespread public feedback.
The Sallie Mae petition was started by a recent graduate, Stef Grey, who says she's already paid $300 to the company since May in forbearance fees.
"If I don't find full-time work before the end of January, Sallie Mae is going to charge me another $150 in 'forbearance fees'," she wrote.