Private Student Loan Lenders Prepare for Battle
Putting an End to Student Loan Profiteering
Mr. ToughMoneyLove on the other hand is a crusader against student loan debt. We have been fortunate in our ability to send our sons to college without asking them to borrow. If we did not have the resources to accomplish that, we would have insisted on a Plan B that did not include student loans. Who wants to start their life as a young adult dragging around a student loan ball and chain?
Recent estimates are that the federal government would save $94 billion over ten years by ending the private student-loan subsidy program. The private lenders rake in huge profits with very little risk, because the taxpayers are backstopping the loans.
Private Lenders Launch Pro-Choice PR Campaign
President Obama has formally proposed shifting government money away from private student loan subsidies and into direct government lending and grants. In response, as this piece from NPR confirms, the lobbyists for the private student loan profiteers have entered attack mode.
The lobbyists for the lenders are taking a hilariously “warm and fuzzy” approach. They say that eliminating the government subsidies interferes with “choices” that student borrowers should have. From the NPR piece:
“We believe preserving choice is an important component of this program,” says Jack Remondi, chief financial officer at the biggest private lender, Sallie Mae.
Kevin Bruns, of the industry coalition America’s Student Loan Providers, wants to keep the two choices: direct federal loans and subsidized loans.
“All the Democratic candidates’ health care proposals in the last election, and in this administration’s health care proposal, are completely premised on consumer choice,” Bruns says.
Sure Mr. Bruns, student loans and health care – they are equally important to us all. Have you ever heard the phrase “comparing apples to oranges”?
Who can be against “choice”? We have been programmed to elevate choice to being a virtue unto itself, without due regard to the consequences of our choices. Enough of that silliness. The devil is in the details of that choice.
Can the lenders’ hypocrisy be anymore transparent? The choice that is being threatened is one that involves wasteful government spending that boosts the profits of private lenders. I’m surprised that the lobbyists aren’t claiming that it is somehow “un-American” to remove the private lenders from the student loan gravy train.
Sallie Mae is the largest provider of government subsidized private student loans. It has hired two powerful lobbyists: Tony Podesta (his brother headed the Obama transition team) and Jamie Gorelick (a senior Justice Department official in the Clinton administration.) And to boost its own PR credentials, Sallie Mae is moving 2000 jobs back to the U.S. that it had sent overseas. The United States Student Association is unimpressed:
In the past year, while students have been drowning in debt, Sallie Mae awarded its chief executive $4.6 million in cash and stock and its vice chairman more than $13.2 million in cash and stock, including the use of a company plane.
If the “choice” PR campaign fails, I expect that private student loan lenders will quickly roll out another campaign, perhaps arguing that their loans will assist students in establishing a credit score. That’s right – let’s be sure that young adults quickly conform their financial lives to the whims of both private lenders and the credit score industry. These fine institutions deserve our respect and loyalty.
So here is my call to action. Please contact your Congress person and Senators and tell them that $94 billion in subsidies to private student loan lenders is a choice we can and should do without.
Image credit: GiddyGoose