Opposition is emerging to President Barack Obama’s plan to take private banks out of the student loan business.
Student indebtedness has grown to an average of nearly $23,000 per individual, and student loans remain a lucrative business for U.S. banks, earning $85 billion annually, according to news reports.
The White House plan would cut out the middleman and let students borrow directly from the government, with the hope of making more money available for loans, while saving an estimated $94 billion over the next decade.
Citigroup has already begun an e-mail campaign urging its borrowers to write Congress to oppose the plan, notes Talking Points Memo.
And executives for Sallie Mae, the biggest provider of student loans, said if the plan is adopted as proposed, an undetermined number of banking jobs could be lost.
Company executives said they’re backing a plan that would allow private banks to market loans through the Department of Education, and charge the government a fee for every loan processed, reports the Times Leader of Wilkes Barre, Pennsylvania.
According to the Project on Student Debt, average debt for the graduating class of 2007 was $18,484 at public colleges and $23,065 at private schools.
In 2008, 14 percent of students took out higher interest private loans to finance their education, according to KOMU-TV of Columbia, Mo.
Meanwhile, the default rate on student loans is up nearly 25 percent from the same period last year, from 5.2 percent to 6.9 percent, reports the Times-Herald Record of Middletown, New York.
The same article reported on a Facebook group — Cancel Student Loan Debt to Stimulate the Economy – with 172,612 members in early April.
–Ronnie Lovler/Newsdesk.org
Sources:
“Sallie Mae execs want to save jobs”
Times-Leader (Pennsylvania), May 12, 2009
“Citigroup spends bailout money lobbying student lenders to sabotage Obama plan”
Talking Points Memo, May 3, 2009
“Student Loans Increase”
KOMU-TV (Columbia, Missouri), May 5, 2009
“ABCs of the growing crisis in student loans”
Times-Herald Record (Middletown, New York), May 10, 2009
“Sallie Mae’s about face on loan subsidies”
Washington Post, May 10, 2009
Kudos to the President, the first president who actually had student loans.
The student loan industry is ripe with greed, arrogance, and corruption. The Sallie Mae CEO has taken nearly a half billion dollars personally as a middleman. He now owns three mansioned estates (annapolis, MD / Harwood, MD / Naples, FL), one with a private 18 hole golf course – although an old photo and the golf course is still under construction, you can see where taxpayer subsidy dollars go via Google Maps at coordinates 38°51’38.52″N, 76°40’4.47″W
Sallie Mae owns two private jets – they used to own three. The jets are tail numbered N50FD and N188AK.
You can see these jets at the following links:
http://www.airliners.net/photo/Israel-IAI-1125A-Astra/0523432/L/
http://www.airliners.net/photo/Israel-IAI-1124-Westwind/0841982/M/
That is where the taxpayer subsidies are going, private golf courses and private jets.
When a FFELP loan defaults, the taxpayer pays nearly twice the amount of the loan. Sallie Mae is allowed to attach fees, penalties, and crank the interest rate up to above credit card rates. After a period, they capitalize those fees, penalties, and interests and put the loan to the taxpayer for payoff. So, a 20k loan becomes more than 40k cost to the taxpayer. In the direct program, the 40k might still be the receivable, but it does not effect cash flow as we see with the middlemen involved. Why are we funding this madness?
Let’s not forget the corruption that the subsidies fund. The following student aid administrators got into more than a little hot water for taking kickbacks and other inducements from the student loan industry – most lost their jobs:
Ellen Frishberg – Johns Hopkins
Catherine Thomas – USC
David Charlow – Columbia
Lawrence Burt – University of Texas
Walter Cathie – Widener University
Tim Lehmann – Capella University
Daniel Pinch – Emerson College
In 2008, more than 100 Universities were under investigation for more than 90% of their FFELP loans going to one provider. The notion that there is competition in this “market” is ridiculous – the student loan companies pay or induce schools for preferred lender status resulting in nearly all loans at any one school going to one provider. In the above instances, those inducements were to the administrators themselves. From “School as Lender” to call centers to printing – the inducements to schools are great and the payoffs for the middlemen even greater.
Of course, some in congress receive so much cash from the student loan industry, they will try to derail this improvement. Particularly, Buck McKeon and John Boehner receive the most from the student loan industry. Buck and Boehner have been the champions of the industry for years and are responsible for much of the elimination of competition and stripping of consumer protections for student loans – all to the benefit of the middlemen lenders. There are no student loan companies in Buck or Boehner’s districts and no meaningful employment by student lenders in those districts. This is pure pay for play.