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What do you call it when arrogance, avarice, and absurdity combine? Well, one name for it would be “Sallie Mae.”
Despite the sweet name, Sallie is not a person. It’s a giant financial corporation that is America’s largest provider of student loans. It began in the 1970s as a government entity, but in 1997 it was privatized. Along with such other private lenders as Wells Fargo and Discover, Sallie Mae has used the “Family Education Loan Program” to milk windfall profits from college students. The program is a corporate boondoggle, because the only thing it privatizes are the profits the lenders pocket through hefty fees they levy on students. The industry’s losses, on the other hand, are socialized, for the government covers 97 percent of any loans that students fail to pay.
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Because this absurd subsidy of private lenders rips off taxpayers while overcharging students, Obama has proposed ending it in favor of expanding the government’s far-more-efficient and less costly program that loans directly to students. Cutting out the middleman would save taxpayers more than $9 billion a year, while giving college kids a much better deal.
Going through private lenders is all the more absurd today, because a government bailout is all that is keeping them afloat. Any money they lend is not private capital, but ours. Why keep subsidizing them to loan our money? Logic, however, is not a concept that bankers even want to grasp, so they are hiring top-gun lobbyists and rallying anti-government ideologues to oppose Obama’s plan–and keep their boondoggle going.
Obama is right to halt this multibillion-dollar rip off and to redirect it to help students. For more information, contact PIRG, a national grassroots group: www.uspirg.org.
“Plan to Change Student Lending Sets Up a Fight,” www.nytimes.com, April 12, 2009.
“Washington, D.C.: Student Supports Financial Aid Increases in Obama Budget,” www.uspirg.org, April 4, 2009.