Uncle Sam and Sallie Mae need to go their separate ways

time for sallie may to take a hike. http://blog.nj.com/njv_linda_stamato/2009/08/uncle_sam_and_sallie_mae_need.html

Nice article about why Sallie Mae and government need to go their seperate ways.
"One way we can make college more affordable -- because a lot of young people have been asking me about this on the campaign trail -- is by reforming a wasteful system of student loans that benefits private banks at the cost of taxpayers. Private lenders are costing America's taxpayers more than 15 million dollars every day and provide no additional value except to the banks themselves. I think the system needs to be fixed." (Barack Obama in Yale Daily News: May, 2007)

The new Student loan reform bill contains the essence of Obama's reform proposal: Scrap the existing program--so that all federal loans are made directly by the government--in order to save billions of dollars in subsidy payments to lenders and make it possible to redirect money to pay for expanded grant aid to needy students. According to the Congressional Budget Office, replacing subsidized loans made by private banks with direct government lending would save between $87 and $94 billion over the next decade.

Under the bill, banks and other lenders would no longer "originate" federal student loans--there is no need for a "middle man"--but they can service them. And guarantors can compete for grants to provide borrower services like financial-literacy education, default prevention, and borrower retention.

Given the money banks and private lenders get from this cash cow, however, they aren't walking away. Lobbying to stay in the game is unrelenting. In "Student loans: Use public funds for college students, not for banks and private lenders," I highlighted the efforts of Citibank to defeat the reform legislation.

Recently, efforts by Sallie Mae have now come to light. Sallie Mae, the nation's largest student-loan company, spent $3.4 million on lobbying in the first half of this year in an effort to persuade lawmakers to consider alternatives to President Obama's plan to end bank-based lending to students and replace it with direct lending, according to an analysis by the Chronicle, the Center for Responsive Politics andThe Huffington Post.

Sallie Mae is pushing a counterproposal that would allow student-loan companies to originate loans before selling them to the government. Such a great idea that Sallie Mae felt it necessary to hire several Washington-based lobbying firms, including a group led by Tony Podesta, a top Democratic fund raiser with longstanding ties to members of Congress, to push it. According to the Chronicle of Higher Education, its key hire was Jamie Gorelick, a deputy attorney general in the Clinton administration and partner in the law firm of Wilmer, Cutler, Pickering, Hale and Dorr. The firm billed Sallie Mae $270,000 for its work in the first half of 2009, according to the analysis.

Sallie Mae also showered campaign contributions on individual members of Congress, and on moderate "Blue Dog" Democrats. (The Blue Dogs have been the most vocal in their opposition to the president's plan, warning of job losses that could result from a switch to 100-percent direct lending.)

Enough already! Blatant lobbying on behalf of private interests can not be allowed to obscure the fact that it is public money we are talking about--public money--and the need to use as much of it as possible in direct support of students. If aiding banks and private lenders has merit, and creating private jobs with public funds is defensible, let's do it directly and transparently and with sufficient safeguards--not indirectly as a subsidy for dispensing public funds (which the government also guarantees!).

Let's cut through all the rhetoric and do what's right and sensible. Let's reform the student aid program once and for all and put our dollars where the needs are--with the students. That the banks can (and will) take care of themselves is clear from the week's headlines.


Personal note from blog owner: About damm time someone speaks sense about this issue.