The CFPB, using Department of Education survey data, developed a ranking system for student loan servicers that measured participant satisfaction in Sallie Mae's Direct Loan program. The findings ranked Sallie Mae at the bottom of the list of four providers. Categories measured included loan defaults, both by dollar volume and number of loans, and overall program satisfaction.

CFPB staff analyzed quarterly performance reports over the past year in five areas from nonbank servicers FedLoan Servicing, Great Lakes Higher Education Corp. & Affiliates, Nelnet and Sallie Mae. The results, based on grading on a curve, appeared in a Sept. 23 blog post by Rohit Chopra, CFPB's student loan ombudsman.

Sallie Mae ranked worst in borrower, school and federal personnel satisfaction, and second when it came to managing loan default by dollar volume and number of loans.

Unfortunately, borrowers who don't like their servicers have little to no option when it comes to changing, Chopra wrote.

Loan servicing contracts are awarded to participating servicers with the best performance scores. Based on grades given for 2012 performance, Nelnet likely will be awarded the highest allocation of new servicing volume, while Sallie Mae will receive the lowest number, according to Chopra.

As expected, Sallie Mae takes exception to the analysis and complaints that it does a poor job servicing its 25 million student loan customers. In fact, Sallie Mae has ranked first in cumulative loan default protection since 2009 as measured by the U.S. Department of Education, according to Patricia Christel, Sallie Mae's vice president of corporate communications.

"Our number one priority is to assist our customers and ensure their success, and our customers' track record is indicative of our efforts," Christel said. "We take great care in providing service to our credit union partners' customers, and their approval rates and successful repayment trends are both very strong."

Calls to the U.S. Department of Education to verify Christel's claims were not returned due to the recent government shutdown.

Sallie Mae's private education loans are designed to supplement federal grants and personal savings as a way to pay the increasingly high costs of a college education, Christel said. The private education loan offers families careful underwriting, in-school payments to help students graduate with less debt, and on-time payment rewards. It is a popular alternative among credit unions, she adds.

"Sallie Mae's private education loan referral program can be a good choice for credit unions that want to offer an education loan to their members and their families, but prefer not to deal with underwriting, funding and servicing the loan," she said.

Next Page: Staying Current

Currently, 92% of the 40-year-old firm's private education loan customers make on-time payments and defaults have fallen to just 2.7%, the lowest levels since prior to the recession, Christel said. During the past academic year, Sallie Mae assisted 2.1 million past-due customers to return their education loan accounts to good standing, preventing $41 billion in federal and private education loan defaults.

CFPB's hardline analysis comes on the heels of several federal probes of the student loan corporation, including a investigation by Sen. Sherrod Brown (D-Ohio) over Sallie Mae's failure to assist troubled borrowers, and Sen. Elizabeth Warren (D-Mass.) over failure by both the Department of Education and the Department of Treasury to investigate incidences of alleged wrongdoing by the loan servicer.

Sallie Mae since 2007 has faced a litany of woes, some of which focus on a perceived lack of concern for troubled borrowers in a rapidly growing loan market. Federal student loan debt has doubled since 2007, growing to more than $1 trillion. According to government figures, the average loan is now $26,000, an increase of more than 40% since 2007. The number of Sallie Mae borrowers eligible for the Obama Administration's Income-based Repayment Plan far exceeds the number that the loan servicer has steered toward that option, according to reports.

Warren further complained in a Sept. 19 letter to U.S. Department of Treasury Secretary Jacob Lew and U.S. Department of Education Secretary Arne Duncan that the two federal agencies have given Sallie Mae "little more than a slap on the wrist" for charging military personnel excessive interest on student loans, improperly marketing student loans and several other legal infractions.

"Government always thinks the private sector is making obscene profits on these things," PSECU's Smith said. "But the default rate on student loans is going through the roof."

PSECU is slowly easing itself out of the student loan business, citing increased risk and regulatory changes. That position contrasts with others in the industry.

For example, University of Wisconsin Credit Union in Madison, Wis., doesn't see things the same way, according to Mike Long, the $1.8 billion credit union's EVP/chief credit officer. With $315 million, or 28%, of the credit union's overall loan portfolio in student loans, Long said he believes UWCU is the second largest provider of student loans among credit unions nationwide.

"It's a unique asset class for credit unions, with less than 1% of student loans delinquent at any time," he said.

Long added that credit unions should get more involved in student loans to members.