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Sallie Mae’s Profits Soaring at the Expense of Our Nation’s Students

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Sarita Gupta (Photo: Dale Robbins)

Throughout the Great Recession, only one type of household debt grew: student debt. As student debt and student loan defaults escalate at an unsustainable pace, private lenders continue to increase their profit margins. Sallie Mae is the largest private student loan lender and one of the chief profiteers off of student debt, yet it faces minimal public scrutiny and accountability. There’s an incredible amount of work to be done to try to ease the burden of student debt in this country, but we can start by regulating lenders like Sallie Mae whose profits are soaring at the expense of our nation’s students.

The reality is that students won’t have access to an education without the accompanying burden of a lifetime of debt until we take the undue influence of big banks out of our democracy. Today, lenders like Sallie Mae spend millions of dollars peddling influence with legislators. Sallie Mae’s lobbying efforts were recently described by The New York Times as “aggressive” — the company spent nearly $37.5 million on lobbying from 1998 to 2012. This year, Sallie Mae has already spent over $1.2 million on federal lobbying trying to squash several consumer protection bills, including the Private Student Loan Bankruptcy Fairness Act of 2013 and the Fairness for Struggling Students Act of 2013. Both pieces of legislation call for increased regulation of private banks with a history of bad lending practices. To combat this, hundreds of students and activists traveled to Newark, Del., late last month to introduce a resolution demanding increased transparency and disclosure at Sallie Mae’s annual shareholder meeting. The resolution received support from an unprecedented 35.5 percent of shareholders who voted, a huge victory in the long-term campaign to hold Sallie Mae accountable to its customers.

Last month also marked another major victory in the battle to rein in Sallie Mae: after months of requests, CEO Jack Remondi agreed to meet with students. Now, those directly affected by the bank’s sky-high interest rates will have an opportunity to explain why those business practices are actively standing in the way of recent graduates’ ability to contribute to an economy that desperately needs them. We’re always fighting for the 99 percent to have a seat at the table, because when enough of those voices are heard – the voices of workers, students, community members and consumers – changes finally get made.

On July 1, student loan interest rates will double from 3.4 percent to 6.8 percent unless Congress acts to provide relief for approximately seven million students. The increase will cost borrowers receiving the federal subsidized Stafford loans an additional $1,000 per year. A variety of bills have been introduced to address the looming July 1 deadline. Students can’t afford the same lobbyists that wealthy banks and corporations can, but they’ve still managed to get their voices heard on Capitol Hill and are committed to taking an active role in finding a legislative solution.

The final piece of this puzzle is regulation. On May 8, the Consumer Financial Protection Bureau (CFPB) issued a report (“Student Loan Affordability”) that encouraged private lenders to modify existing private student debt through a series of options, including refinancing interest rates, term extensions, principal forbearance and principal reduction. Other experts have suggested a shared loss on defaults and increased transparency on fees associated with student loans. We used our incredible online activist community to mobilize borrowers to submit comments to the CFPB and offer real-life testimony on how these regulations could provide immediate and real relief for those struggling to pay off their student loans – allowing recent graduates to participate fully in our economic recovery.

At the end of the day, the story of our country’s student debt crisis is just the latest chapter of a troubling narrative where the economy only works for the wealthiest one percent of Americans. Corporations are bringing in record profits despite record-high unemployment, and now students are taking out mortgage-sized loans just to get an education. Students and graduates are fighting back to put education into the hands of consumers, not wealthy corporate lenders. The only way that higher education can return to an affordable and accessible right for all families is if we remove the corporate bottom line from the classroom and make loan forgiveness, bank regulation and education investment a national priority.

Sarita Gupta is the executive director of Jobs With Justice, a Washington, D.C.-based organization. With offices located nationwide in 25 states and 45 communities, Jobs With Justice collaborates with community, student and faith organizations to build a vital labor movement for economic and social justice.

Gupta appeared on Moyers & Company last year to speak with Bill about restoring workers rights and her involvement in the 99% Spring.

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  • anonymous

    All basic consumer bankruptcy protections and statutes of limitations must be restored to both federal and private student loans immediately.

  • Amber

    I am never ever going to be able to pay off my debt in my lifetime. My loans were consolidated with Sallie Mae in 2001. I started paying on it then. My loan was 32,000, and I’ve never been late, or in default. I’ve paid for 11 years now. I’ve been paying an average of 300 a month. My loan has increased from the previous amount to $65000. It’s government sanctioned loan sharking, and should be illegal. My interest rate is over 6%, and I was told it won’t ever change. I am drowning in debt because of this. I have no help from our government to reduce this loan. Sallie Mae is a corrupt corporation, and should be stopped. Bush Jr. did this terrible thing, and I’m mad as hell I was snared into the jaws of snakes.

  • Anonymous

    Sarita, What you fail to mention is that none of the legislation you mention, and none that has been proposed calls for the return of bankruptcy protections to federal student loans. Again, everyone has mysteriously tiptoed right around this most pressing, and systemically critical need. No one in Congress will actually fight for the people by demanding the return of this fundamental, systemically critical consumer protections. Not Warren, not the CFPB, not Dick Durbin, and certainly none of the so-called “free market” champions in the republican party, who somehow forget the importance of bankruptcy protections for a free-market lending system when it comes to student loans. We are not impressed. Not by Sallie Mae, not by Congress, not by the CFPB, and not by the soft, wishy-washy media-including this piece- that has so badly papered over the crux of this problem for so long, and at such high cost to the American people. Has CNBC bought Moyer’s show too?

  • Chris

    Let’s look at this situation a little differently. There are issues with Sallie Mae making money on students, but not with the Federal Government making money on students. We are upset that young adults take out a $30K loan for education which pays a dividend through lower unemployment and higher wages, but we have no problem with a young adult taking out a 72 month loan on a car for $25-30K.

    At issues here are the choices students make. In many ways they are no different than rent, cable TV, internet, cell phones, eating in or out, etc…. As with each of these, you have to choose what you can afford. In education, affordability means nothing, and until that changes, we will continue to have outrageous tuition increases and borrowing rates.

    Finally, why should the students who worked their way through college, got scholarships, or went to cheaper state institutions have to bear the weight of those that made bad decisions. One groups struggles so the other doesn’t have to. Seems like that the highest level of “unfair” I see.

  • Chris


    To your first point, I don’t think that was said in this article in anyway. It mentions returning higher education to the hands of the students (the people who higher education is supposed to work for) and fundamentally shifting campuses away from having profits be the bottomline. There is also a difference between choosing to attend college to improve our communities and contribute back to society than just buying a car… It seems like comparing apples and oranges.

    The reason why college is no longer affordable isn’t the fault of the students. It’s federal and state politicians not funding it, tax breaks being given to corporations instead of tax dollars being given to state state schools, it’s university presidents privatizing systems and giving greater access to publicly traded corporations that aren’t accountable to the students or us – but to their shareholders. Until that changes, tuition will (as you put it) continue to be outrageous because these banks like Sallie Mae will keep loaning money to students no matter what the cost is to the borrower. Banks, politicians and college presidents know that because of the tough economic situation and difficulty in finding jobs, classrooms will remain full regardless of the burden placed on those being forced to borrow loans.

    Finally, the myth of “working your way through college” needs to be ended. Nearly 70% of all students have to take out loans to finance their education. Of those with loans, the average debt level is $27,000. Since 1985, college tuition has increased 500%, well beyond the rate of inflation or real wage increases. What your talking about just isn’t real, and it’s because the system has been rigged against students by right-wing politicians and corporations.

    We need to stop blaming students for deciding to obtain college degrees. Education is a right, that everyone should have access to without a life-long burden of debt attached to it. Like Sarita said, “The only way that higher education can return to an affordable and
    accessible right for all families is if we remove the corporate bottom
    line from the classroom and make loan forgiveness, bank regulation and
    education investment a national priority.”

  • Anonymous

    If profits are soaring, it’s too bad Sallie Mae can’t be required to hire people with student loan debt, pay them a decent income and a stipend toward paying down their debt and forgiving portions of the debt as they work. The longer they stay on the job, the more debt is forgiven. These workers would get experience, build their resumes and pay down this debt. This is a win win for us all! And, I agree with Alan Collinge, put the bankruptcy protections back in place for these loans.

  • Anonymous

    I don’t understand. I thought Sally Mae was currently government run. Why would the government screw over the public like this? I thought Sally Mae was a government created entity? I’m confused. Didn’t Sally Mae lose billions of dollars during the great recession? Wasn’t there a big corruption scandal? Why is Sally Mae still allowed to bilk students on these loans?

  • Chris

    Sallie Mae is a publicly traded corporation, accountable to shareholders and their Board of Directors. It was created by the government but became fully privatized in 2004. Check this out for more information on them:

  • Paige

    sallie mae has literally ruined my life….not one customer service agent has given me
    correct information, every time I try customer service the response is different. The only opportunity to lower my 9.25 interest rate is to sign up for auto debit….did it….had to cancel my bank account authorization to sallie mae because they kept taking not only different amounts of $….but way higher payments then what I was told. I will be paying this loan until I am dead….then I feel bad for my husband or my kids because they will also be stuck with it until their dead….for this I am sorry, I wish I had never gone with sallie mae.

  • Educated

    This article is one-sided and fails to mention the students who would not even have access to an education if it wasn’t for the student loan program. It is not up to Sallie Mae to tell a student to be responsible when borrowing, it is something they should have an understanding of prior to entering college. If a student does not have basic financial education..sorry…they don’t belong in college.

    Federal student loans allow you to deduct the interest, had low interest rates, and they do provide flexible options such as consolidation, income based repayment, or the ability to defer payments.

    Let’s take responsibility for our own borrowing-America and quit trying to blame everyone else!

  • Anonymous

    I agree with Alan Collinge too about the bankruptcy protection, but I would never want to work for those loan sharks. In fact, I often wonder how Sallie Mae employees and lobbyists live with themselves.

  • E

    the only thing correct in your assertion is that people would not have been able to go to school otherwise. sallie mae dispersed the loans largely knowing they couldnt be paid back and is cashing in on the interest. saying anyone ‘doesnt belong in college’ due to their financial background is absurd and is supposed to set us apart from others. “educated’- you sound far from it

  • Alan

    The proposals offered up
    here are woefully incomplete.

    Having devoted myself to this
    problem since 2005(full time since 2008), my research (which has been
    validated by numerous journalists, and noted experts) has led me to
    conclude very strongly that in the current political environment, there
    is one clear solution that does actually fix (not erase) the problem:
    Returning, at a minimum, standard bankruptcy protections.

    It is actually the ONLY solution that both offers deserved, rational relief to
    borrowers AND corrects terminal flaws introduced into the higher
    education financing system years ago- flaws that have propogated and
    festered systemwide, and which are responsible for the unchecked
    inflation, horrible/absent oversight, high default rates, and other
    problems that now threaten the stability of the entire system.

    This documentary project is, no offense intended, woefully incomplete having
    neglected to include this solution among the candidates.

    A leaked Sallie Mae memo listed bankruptcy (and keeping it gone) as #2 on
    its list of corporate priorities. So to see this missing from this PBS
    production is very, very disappointing and a bit unsettling, frankly.

    I do hope that in the interests of the integrity of this production
    effort, and the public interest that the PAT staff is listening and
    might be open to including a 5th essay.

    Alan Collinge

  • Anonymous

    You are right. I had not thought of that.

  • Anonymous

    What was Sallie Mae’s #1 priority, out of curiosity? And thank you for the work you are doing. You were definitely ahead of the curve in seeing student loan debt as a growing problem. I realize there are few rewards for that!

  • Anonymous

    Paige, I hope you read this. My experience is/was similar to yours. When I was considering college, I received endless amounts of attention. However, the information I received was very often misleading and there was information I needed at the time that was never given. Then, once I signed the loan forms, all attempts to contact customer service were futile. They owned me and, yes, my life from that point on was ruined.

  • alan

    #1 was growing loan originations.

    Thanks for the props. Kind of a thankless niche, so your comments are all the more appreciated!

  • Anonymous

    Well, it may come as cold comfort, but student loans are cancelled by death.

  • Anonymous

    I just can’t ignore the reality that we’re talking about kids. Should people be responsible? Yes. But I can’t see the justification for making a bad decision at age 18 something for which there is NO remedy for the length of a person’s entire life.

    A 40-year-old who (irresponsibly) buys a car she can’t afford can get relief. A 40-year-old who (responsibly) takes the risk of starting a business that fails gets relief. In the latter case, we as a society have deemed this protection against risk a public good; we want people to start businesses. (Why doesn’t a degree fall into that same category?) In both cases, we determine that crippling people with debt hurts our interests as well. They have less money to pay their rent, patronize our businesses, and support their own children.

  • Anonymous

    I have an $8,700 Sallie Mae loan, and while I am looking for work, I have to pay $200 every quarter just for the right to have a forebearance on the loan. That is in addition to the interest on the loan that I am already paying. If it were tabulated as interest that “fee” amounts to 9.2% annual markup would bring me to an annual rate of 17.8%.

    Interest – compounded into the principal- used to be the cost you paid for any delay in repayment on a loan. Now you are charged hundreds in “administrative fees” for what amounts to their recording the answer to the question “Do you have a job yet?” I fail to see how this is legal when I’m already bound by law to repay all of this money even were I to file for bankruptcy. And the crazy thing is since I am not employed, I have to put this payment onto a credit card, where the interest is even higher. So my misfortune is a cash cow for both- borrowing at 17% to finance borrowing at 18%.

  • Richard

    As a former Sr VP of Lending in a couple of large banks, I can attest that SallieMae is a predatory lender. They change terms unilaterally, change account number without notifying the borrower in writing, lie to customers when you are able to get ahold of them, and try to sell costly programs u DDR the guise of “helping pay down your loan”. They should be shut down and prosecuted for fraud.

  • Fu Sallie Mae

    We hate Sallie Mae just as much as you and we are sick and tired
    of it. Join the fight and find us on facebook at Fu Sallie Mae.

  • Anonymous

    Then teach basic accounts in high school. If accounts is taught as a basic compulsury requirement in high school, then the student with a PHD, BA, MA, etc won’t be in ruin by paying off loans with interests that are stupidly high.

  • goingbrokewithtuition

    As barely a member of that “1%” crew, paying for two children in college without the benefit of financial aid is a crusher. The real reform must be directed at colleges and universities that have consistently raised tuition at a rate far higher than inflation for decades. Paying full tuition at a private university for those of us who can “afford” the sticker price is just one more thinly veiled tax since we are subsidizing other students and families who meet criteria for financial aid. Once again, the press gets this this part very wrong.

  • blimpalot

    Oh, boohoo. Cry me a river.

  • Anonymous

    yeah. the fact that the interest rate is like $3 per day makes it impossible for a graduate to pay off a loan.. ridiculous

  • Anonymous

    The fact is access to education should not be dependent upon your ability or not to undertake massive amounts of debt. Education should be affordable- the fact that it is not doesn’t mean we should make it even harder on those people whose families aren’t independently wealthy or who aren’t taught by their parents how to make informed decisions about their financial future. These are not things everybody is taught, and when you are a lender who is protected by law against any default by the people you’re lending to, you’re God-damned right they better explain this to people! Instead they’re throwing more money at them than they need- “Sure, don’t worry about needing 20 years to pay off that Spring Break! It’s worth it!”

    These are young adults we are talking about here after all. You know how much tuition students in Quebec pay? $3,600 per year. That includes law school. Would you be willing to pay 10-15% more in taxes to save $120,000-$200,000 per kid on all their higher education and have them begin their adult lives without a debt yolk around their necks? I would. Would you like to live in a real meritocracy where the only barrier to achievement is your own mind, and not your parent’s bank account? I would.

    We have a poverty of imagination in this country- and too many people who are OK with getting screwed over. But that is changing.

  • Anonymous

    More selfish libertarian screeds from the 1%.

  • Anonymous

    Thanks, Alan! I appreciate all that you have done for this issue. Your clarity and persistence are appreciated. Your organization and writings in different venues have given me some hope. I absolutely agree that the restoration of consumer protections for both federal and private student loans is the answer. I now advise my children to NOT go to college in the United States. If they must go then find another country or find another way to pay than loans. Profiteering on the backs of students is deplorable. I believe that anyone who truly grasps the issue will want consumer protections restored. Stay strong!

  • Chuchididit

    The little fish always gets eaten by the bigger fish. We can bail out people from poor buying decisions but can’t bail future professionals. I am 35 and still living at home because living on my own with college debit is not an option.