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.

Speaking of NO - right wing says no to more efficient college loans

Bill ending banks' role in student loans stalls in Senate  from the Washington Post 1/29/10

The breadth of the effects of the right wing's nay saying is sickening. As millions of aspiring kids and their families struggle to figure out how to finance college tuition, the Senate Republicans are saying NO to a bill passed by the House last year that would save families $80 billion dollars over the next ten years, largely by eliminating bank fees and profits. What's not to like? 

Ask Republican Lamar Alexander of Tennessee who said, in some sort of Orwellian double-speak, "Relying on budgetary gimmicks to stage another Washington takeover, this time of 15 million student loans, is not good for college students. The Department of Education in Washington will not be able to serve students as well as 3,000 lending institutions."  Mr. Alexander has been the recipient of more than $500,000 in contributions from the securities and banking industry since 2005, by the way.

Now, those institutions range across a broad spectrum of size and kind. But let's take an average. This average bank would, if the legislation fails, earn $26,667,000 over that ten year period, or roughly $2.7 million per year. Alexander claims this is a government "takeover." Senator, this is a federally funded, federally guaranteed program. The banks have been used to administer the funds but, because of their dubious records over the last 10+ years and their excessive profits torn from the skin of the backs of the middle-class, they have lost their privileges. Direct lending of taxpayer money back to taxpayers seems to make eminent good sense. And, as the right wing is so fond of trumpeting, it would cut inefficiencies. 

Who is really for the American people when millions of struggling kids need college financing?

Certainly not the right wing, which wants to wring every last nickel out of the middle class, and has no moral compunction about doing so.