22 August 2006

The Student Loan Scam?

A student loan system Grover Norquist would love:

Sallie Mae has transformed over the past 10 years from a government-sponsored enterprise—or GSE—with the limited function of providing a secondary market for student loans, into a vertically integrated private corporation dominating all aspects of the student loan business, all while never losing its grip on billions in government subsidies or the federal guarantee on much of its risk.

The practices that have made fortunes for the company's executives, and fueled a 1,900 percent growth in its stock price since 1995, include increasingly cutthroat treatment of the millions of students who depend on the company to finance their education.

For example, Sallie Mae has set aside $3.6 billion in stock options for employees since 1997. Albert Lord and Tim Fitzpatrick, the current CEO, together have received $367 million in total compensation since 1999.

Albert Lord, the chairman and past CEO... holds a million shares of company stock... he exercised options on another $15 million in the past two years. He leads a group bidding on the Washington Nationals baseball team... It was reported in early January that he's building his own private 18-hole golf course in suburban Maryland.

Meanwhile, Alan Collinge, a 35-year-old former aerospace engineer in Washington State, is feeling a little low. He originally borrowed $38,000 in student loans... In 2001, after making about $7,000 in on-time payments, he left his gig at Caltech on the promise of a government job that evaporated after 9-11. He was underemployed for two years, making ends meet as a short-order cook in Alaska; his student loans went into default. "When I got back from Alaska, I got a bill for $85,000 and it pretty much blew me away. That's when I realized that somebody is making a lot of money around this deal."

Health care and education. Two critical aspects of civilized society. Both have double-digit cost increases every year. Both have corporations exploiting customers. Neither system serves Americans like it should. How did it get this way?

By buying politicians! Like our own John Boehner, for example:

John Boehner... is Sallie Mae's favorite member of Congress; he has received $122,470 from the Sallie Mae PAC in the 1989–2006 election cycles.

Anyone who is surprised to read this about Boehner probably missed my earlier posts:

John Boehner is just like us!
DeLay is Coke, Boehner is Pepsi
John Boehner: Big Fish in a Dirty Pond

The culpability and spinelessness is with Congress, but let's face it: students are infamously clueless. If they clued themselves in and took action, things would change. It's the same with health care (as Paul Hackett openly noted): if 50 million uninsured Americans showed up at Congress' doorstep, things would change.

But they don't, so they won't.

1 comment:

Joe R said...

Yes as usual when republicans are involved, privatization equals making their buddies richer and more campaign donations while the people get screwed once again.

Good post.