Sallie Mae isn’t one of those girls who’re made of “sugar and spice and everything nice.” Well, she is filled with sugar, but it comes from you and me, thanks to a longtime sweetheart deal she has from the federal government.
Sallie is the largest of several corporations that make student loans–this giant issued $22 billion worth of them last year. The sweet part is that all of the loans issued by Sallie Mae and other private lenders are absolutely risk-free for the corporations, because they are fully guaranteed by the feds. When a student defaults, the government steps in and makes the lender whole. No fuss, no loss–it’s a heck of a business to be in.
But, if you think that’s sweet, get ready for a sugar-induced toothache, because Sallie and company also get a taxpayer subsidy for every college loan they make. Yes, a subsidy for taking no risk. And it’s no token giveaway, for it totals some $8 billion a year going straight into the corporate coffers.
Gee, isn’t there a better way?
Of course there is. Get rid of the ripoff middlemen (or, in Sallie’s case, middlewoman) and have the government make direct student loans through the colleges. Among many benefits, this would free up that $8-billion-a-year corporate subsidy, which can then be put into grants to help middle and low-income students go to college.
This is precisely what President Obama has proposed. It’s an idea that makes all kinds of sense and serves the public good–so, naturally, Sallie and her corporate ilk are lobbing furiously to kill it in Congress, hoping to keep the sweet taste of billions of dollars in subsidized profits flowing their way. Sallie Mae alone hired $8 million worth of lobbyists last year to try to defeat the reform.
To help cut off Sallie’s sugar addiction, contact U.S. PIRG: www.uspirg.org.