Friday, February 5, 2010

College Loan Revamping Threatened By Greedy Lobbyists and Complicit Senators

From The New York Times February 5, 2010 (Click here for full article):

"Sallie Mae, a publicly traded company that is the nation’s biggest student lender with $22 billion in loans originated last year, led the field in spending $8 million on lobbying in 2009, more than double the year before, and other lenders spent millions of dollars more, according to an analysis prepared for The New York Times by the Center for Responsive Politics." 

As discussed on New York Liberal State of Mind, January 29, 2010, the revision/rehabilitation of the way Federal college loans are administered is being threatened by self-serving lobbyists. (See original blog post).

The projected savings in the bill over 10 years would be $80 billion dollars.

The private lenders are often enormous institutions like Sallie Mae, Citi, and Wells Fargo, although there are many mid-size competitors, many of which are not household names unless you're in the market for a student loan.

Industry lobbyists claim that some, although they can't or won't say how many, of the 35,000 jobs will be lost if the government takes the reins of the out-of-control profits the companies are making. Let's make an extreme case: one quarter of those 35,000 jobs will be lost under the new plan, or 8750 jobs.

By distributing that $80 billion dollars in savings amongst those theoretical 8750 workers if they are not laid off, each of those jobs would be subsidized by taxpayers at the rate of $91,000 per year, every year over the ten year cycle. Who wouldn't love to run a company with that kind of government subsidy? I volunteer immediately to receive my $91,000.

Put another way, the financial institutions will be receiving $266 from every man, woman and child in America in order to save these pointless jobs. (We know that children don't pay taxes, and we also know that about 1/4th of all adults pay little or no taxes, so you can figure your real share is more along the lines of $400 to support big banks and the like. Great, isn't it?)

There are many alternatives to the current system leaving aside straight up federal administration. States could administer the loans, as could colleges, or scholarship foundations. Direct grants could be made to students using the savings.

Interestingly, Sallie Mae, while it was spending $8 million in lobbying last year maintains a "scholarships" program. The amount they give away? $250,000 - about 3% of what they spend for lobbying. Click here for their "scholarships" page.

There has also been a shocking degree of corruption and lack of oversight of the program as now administered. Educational institutions are entwined with the lenders on an unimaginable scale. Click here to read some highlights - or low-lights, as the case may be.

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