This is a subject we have blogged on before.
The following article is from Alan Collinge, founder of Student Loan Justice.Org:
In exit polls this Tuesday, voters listed corruption as a bigger concern than the War in Iraq. While the White House, Congress, and others inside the beltway may pooh-pooh this sentiment, the citizens hold it dearly, because they see the effect corruption has on their lives.
Take the student loan industry, for example. Since 1994, the cost of attending college has skyrocketed, to where the average student can expect to graduate with over $18,000 in debt for a four year degree. Sallie Mae, the largest provider of student loans, and former Government Sponsored Entity has seen its stock price rise by nearly 2000% during the same period. Its executives have paid themselves billions in stock bonuses. Its Chairman recently attempted to purchase a major league baseball team. Its CEO again topped the list of highest paid CEO’s in Washington D.C.
Many don’t realize that Sallie Mae lobbied for- and got- draconian legislation passed during the same time period. This legislation took away bankruptcy protection for all student loans - federally guaranteed or not. This legislation made it illegal for most borrowers to refinance their consolidated debt, even with lenders willing to accept less profit. This legislation gave the lenders collection powers that would “make a mobster envious”, to quote Harvard professor Elizabeth Warren. These powers include termination of public employment, income tax seizure, wage garnishment, suspension of professional licenses and certificates, and seizure of social security, and disability payments. This legislation has actually made it more profitable for lenders when students default, as opposed to remaining in good stead with their loans.
This legislation has created the perfect mousetrap for a most vulnerable segment of our population: lower and middle class citizens aspiring to achieve the American Dream through higher education.
Those who do everything right, and pay their loans on time are shocked at the sticker price of their education, and many put off marriage and children because of their debt. Less fortunate citizens who weren’t able to capitalize on their education for health, employment, or other reasons are faced with the choice of paying double, triple, or even more than they originally borrowed, or being forced to live “off the grid” and living in fear of their government. Some are fleeing the country. Some are even taking their own lives. Sallie Mae attributes its record profits to fees and penalties extracted from these borrowers.
So where’s the corruption in this? Consider that the Chairmen of both the House and Senate education committees (Buck McKeon, and Michael Enzi) have taken millions of dollars from the student loan industry, and funneled some of this money to family members through campaign committees or PACS. Not to mention the chartered flights for golf in Boca Raton, ski trips to Big Bear, fishing trips in Wyoming, and other extraordinary excesses that this money paid for. John Boehner, who has received the most from student loan companies and is former chairman of the House education committee, secured a job for his daughter with a student loan company (since acquired by Sallie Mae) over a game of golf.
Consider further the corruption inside the Department of Education, which actually makes money from the business of defaulted loans, receiving $1.20 for every dollar paid out. The head of the Federal Student Aid program, Theresa Shaw, was brought into the Department of Education from Sallie Mae, and brought many of her Sallie Mae cronies with her. One has to wonder aloud whether this group was attracted to these lower paying government jobs out of an altruistic nature, or whether they or their family members have a residual interest in the success of Sallie Mae.
A recent OIG report warned Ms. Shaw that her oversight program for student loans was highly vulnerable to conflicts of interest, and that the Department relied too heavily on “partnerships” with student loan companies, rather than real oversight. Again, one has to wonder if that happened by chance, or by design.
Senator Durbin recently called for an investigation of the student loan industry with respect to inducements, and “preferred lender arrangements” between lenders and schools.
One would hope that the new Congress, as it “drains the swamp”, will pay particular attention to the cesspool where Sallie Mae and its ringers within the Department of Education are holed up.
