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Indybay FeatureRelated Categories: Education & Student Activism | Health, Housing, and Public Services
Sallie Mae, Student Debt & Indebted Slavery in an Age of Narco-Petro Fascism
the building of a slave society
The ClassWarfare on Education and those wishing to escape poverty!
Sallie Mae, the student loan company, completed privatization at the very end of 2004. Then as a form of thank you to Mr. Bush for speeding up the process gave $250,000 (money made off of indebt students and former students) to Bush’s Inaugural party (as many suffer from the tragedy of the tsunami in the Indian Ocean) on January 20th 2005. The day that the electoral college proclaimed Mr. Bush winner in the 2004 presidential election Sallae Mae has began its campaign to collect money owed by students even if that former student is terminal and on a deathbed. This begins the new front in class warfare that the corporate media will ignore as soldiers (who joined the "volunteer" military to pay for school) loose veteran benefits.
Below are articles with URLs documenting this new front in the class warfare that the Corporate run regime has begun. Please copy and paste this in every Blog and listserve that is appropriate and/or e-mail to friends and/or print it out and literally post it in public places. The war on the people has just reach a deeper assault.
Sallie Mae completes privatization
Educational lender cuts ties with U.S. government
By Robert Schroeder, CBS MarketWatch
Last Update: 2:21 PM ET Dec. 29, 2004
WASHINGTON (CBS.MW) -- Educational lender SLM Corp., commonly known as Sallie Mae, completed its makeover from a government-sponsored enterprise into a private company Wednesday.
Reston, Va.-based Sallie Mae (SLM: news, chart, profile) owns or manages student loans for more than 7 million borrowers, and is the nation's premier student lender.
"We're very happy and very proud" to complete the privatization process, Chief Executive Albert L. Lord told reporters at a signing ceremony at the Treasury Department.
Congress chartered Sallie Mae in 1972 to create a secondary market for student loans. Lawmakers authorized the company to begin going private in 1996, and the company has been managed as a private entity since 1997, Lord said. Sallie Mae owes the government no money.
Sallie Mae's stock rose modestly on the news, up 17 cents to $53.67.
Lord predicted the company's loan business would not change following Wednesday's announcement.
Sallie's stock price will probably continue to grow by 15 percent to 20 percent per year, at least for the next five years, Lord added after the ceremony.
Assistant Treasury Secretary Wayne Abernathy joined the executive in signing documents severing the company from the government.
Sallie Mae completed its privatization plan almost four years ahead of schedule, Abernathy said.
Lord also reconfirmed Sallie's pursuit of a combination with the Pennsylvania Higher Education Assistance Agency, which the agency has rejected.
He projected optimism that the deal would go through when its merits are considered by authorities.
"We're just getting started" negotiating with the agency, he said Wednesday. "It's a question of who speaks for the taxpayer up there."
In a Dec. 14 letter to the organization's president, Lord proposed that Sallie Mae assume operating control of the agency, while the board would retain control over policy. Student benefit programs would remain unchanged under Sallie's control, he asserted, and student discounts and grants could be increased "very significantly."
"A Sallie Mae transaction would significantly improve the commonwealth's higher education financial picture," Lord wrote, referring to Pennsylvania.
Critics: Corporate donors eye inaugural party favors
By Andrew Miga
Tuesday, December 21, 2004
WASHINGTON - Two dozen wealthy corporations and businessmen each wrote whopping six-figure checks for President Bush's inaugural - donations that a Washington watchdog group charges are meant to win favor with the White House.
``It's to curry favor with the Bush administration,'' said Steven Weiss of the non-partisan Center for Responsive Politics. ``It takes a hefty contribution to get noticed among this group of big donors.''
Among the 14 big-ticket donors who wrote $250,000 checks were energy giants Occidental Petroleum Corp., Exxon Mobil and former Enron president Richard Kinder, according to the latest listing yesterday on the Presidential Inaugural Committee's Web site. Major donors will be granted special access to many of the Jan. 20 inaugural balls and other VIP events. Inaugural officials stress they publicly disclose large donations to avoid any suspicions of special influence for contributors.
``The president believes in full transparency and full disclosure,'' said committee spokeswoman Tracey Schmitt, who noted such contributions help many Americans who otherwise could not afford it to attend inaugural festivities.
The roster of $250,000 donors also includes Dell computer founder Michael S. Dell, Texas financier T. Boone Pickens, the giant education loan company, Sallie Mae; and United Technologies, a Pentagon contractor that makes Black Hawk helicopters for the military. Another defense firm, Northrop Grumman Corp., gave $100,000. A nuclear industry trade group, the Nuclear Energy Institute, also wrote a $100,000 check. In all, 26 donors have given more than $4.5 million for the inaugural, which is expected to cost upward of $40 million.
Energy Firms Lavish Funds on Inauguration
Energy Companies Step Up With Major Donations for President Bush's Inauguration
The Associated Press
WASHINGTON Dec 18, 2004 — More than $4.5 million from the corporate world has flowed to President Bush's inauguration fund, much of it from the energy industry and some of its executives in contributions of $250,000 each.
Outside the energy sector, New Orleans Saints football team owner Tom Benson gave $50,000 and his companies gave $200,000, the fund reported Friday.
Northrop Grumman Corp., the world's largest shipbuilder and second-largest U.S. defense contractor, donated $100,000.
Michael Dell, chairman of Dell Inc., the world's largest personal computer maker, gave $250,000. So did United Technologies, maker
products ranging from escalators to aircraft engines.
Investment banking firm Stephens Group Inc. of Little Rock, Ark., gave $250,000. And the education loan firm Sallie Mae gave $250,000.
Occidental Petroleum Corp., whose business stands to benefit from the president's actions concerning Libya, donated $250,000, as did Exxon Mobil, the world's largest publicly traded oil company. Exxon Mobil reported record third-quarter profits, thanks to higher prices for oil and natural gas.
In April, Bush took steps to restore normal trade and investment ties with Libya, enabling four American oil companies, including Occidental, to resume commercial activities there after an 18-year absence.
Bush's action was a reward to Moammar Gadhafi for eliminating his most destructive weapons programs.
Other donors from the energy sector included Texas oilman T. Boone Pickens, who gave $250,000; and former Enron President Richard Kinder, who left the firm five years before it collapsed and now is CEO of one of the largest energy transportation and storage companies in the country. Kinder also gave $250,000.
Energy provider Southern Co., which owns utility companies in Alabama, Florida, Georgia and Mississippi, gave $250,000.
The Nuclear Energy Institute, the policy organization of the nuclear industry, gave $100,000.
On the Web:
Copyright 2005 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
Jan. 6, 2005
U.S. gets tough on failure to repay student loans
The Associated Press
ROLAND, Okla. - The bill collector called when Clay Stanley, gaunt and suffering from AIDS, lay bedridden in his apartment, back from the hospital after a bout with a viral infection.
It wasn't about a car or credit card. The call concerned a matter Mr. Stanley, who is 39 years old, says he had long forgotten: student loans he took out two decades before. The private collector, acting on behalf of the U.S. Department of Education, said Mr. Stanley must pay $69 a month or the government would take a larger sum than that each month from his Social Security disability checks, Mr. Stanley recalls. "I didn't know what to do, so I said 'OK,' " he says.
Years after a political outcry over high levels of student-loan defaults, the Education Department has become one of the toughest debt collectors around. Over the past decade, it has won a steadily expanding arsenal to wield against former students who don't repay.
A 1998 change in federal law, for instance, made it extremely difficult for people to escape student loans through personal bankruptcy. The Education Department also can now seize parts of borrowers' paychecks, tax refunds and Social Security payments without a court order, a power that only the Internal Revenue Service, among federal agencies, regularly wields. Access to a government database of the newly employed has enabled the department to make much more effective use of private collection companies. And it can go after even decades-old student loans, because there's no statute of limitations on them, unlike most consumer debt.
As a result, the Education Department collected $5.7 billion in defaulted student loans in the fiscal year ended Sept. 30, more than twice as much as in 1998. For current loans that go into default, the department now projects it will ultimately retrieve every dollar of principal, plus almost 20 percent in fees and overdue interest, a prediction few private lenders would be bold enough to make.
The aggressive approach has sparked an outcry from some borrowers, consumer-advocacy lawyers and even some bankruptcy-court judges. They complain that the department runs roughshod over some former students who've suffered reversals of fortune. "Student-loan debt collectors have power that would make a mobster envious," says Elizabeth Warren, a Harvard Law School professor and bankruptcy specialist.
Some who favor a softer stance argue that student loans are a form of financial aid — not quite the same as other consumer credit. They also note that the borrowers have, after all, been encouraged by the federal program to go into debt to attend college. And they say students are usually financially unsophisticated borrowers, lacking an understanding of how debts can pile up because of unpaid interest. So shouldn't they get more slack, the critics ask, than, say, credit-card spendthrifts?
The Education Department responds that taxpayers, legislators and the many students who do repay their loans all expect it to pursue those who don't. It says the federal government, the state agencies that administer the program and the private lenders that primarily make the federally guaranteed loans all work with past-due borrowers. They offer counseling and a chance to refinance at today's low interest rates, says Terri Shaw, the Education Department's chief operating officer for student aid, who adds that there are plans that link the size of payments to incomes. "We're here to help," Ms. Shaw says.
The government's toughness traces back to the 1980s, when politicians became alarmed by high levels of student-loan defaults. Some waged a campaign against deadbeat doctors, lawyers and other professionals taking advantage of the government.
Today the default rate on recently made loans has dropped. It was 5.2 percent last year, down from 22 percent in 1990. And professionals such as doctors and lawyers are far from the worst offenders. Graduates of four-year or graduate programs at private universities default at a 3.1 percent rate, while students of trade schools and community colleges default at almost twice the 5.2 percent overall rate, according to Education Department data. Studies show that those most likely not to repay are students who, like Mr. Stanley, didn't complete their studies.
In the 1980s, Mr. Stanley took out a $3,700 student loan to attend Garland County Community College in Hot Springs, Ark., then transferred to Henderson State University in Arkadelphia. He never graduated, figuring he needed to take a job to support himself. He worked as a clerk in a hospital, a toy-store manager, a bartender and a blackjack dealer, never earning more than $7 an hour.
After Mr. Stanley learned 10 years ago he had the AIDS virus, he started living on disability checks from Social Security. Standing 6 feet 2 inches, he now weighs just 106 pounds and needs a rubber band to keep a ring from sliding off his thinned ring finger. He doesn't have a job and takes 16 pills a day to stay alive. To help make ends meet, he has a roommate in his apartment in Roland, Okla., near the Arkansas border.
Mr. Stanley says he hadn't heard anything about his student loan in six or seven years when he got a call in late 2003 from Pioneer Credit Recovery Inc. Pioneer is a unit of student-loan giant SLM Corp., commonly called Sallie Mae, and has a contract to collect for the Education Department. Mr. Stanley learned that unpaid interest and penalties had nearly doubled his balance to $7,000.
He was getting $696 a month in Social Security disability payments. He says a Pioneer agent challenged the $225 a month he was paying on his 1999 Pontiac Grand Am, which he uses to drive to a clinic in Tulsa, Okla. "I told him you can take my car if you'll drive me to my doctor's appointments," Mr. Stanley says.
He says the agent told him he needed to start paying $69 a month, or the government could withdraw $189 from each monthly disability check. Mr. Stanley says he agreed to pay $69 a month for six months. He supplied his bank-account number and the withdrawals began.
A spokesman for Pioneer's parent, Sallie Mae, says privacy laws don't permit discussing details of clients, but "we followed all appropriate laws, regulations and procedures in working with and counseling the borrower." Sallie Mae — once federally chartered but now separate from the government — buys and repackages loans for sale in the secondary market. It also now originates and services student loans, and its Pioneer unit collects under contract with the Education Department. Like all the student loans, the ones Sallie Mae makes are guaranteed by the federal government.
The Sallie Mae spokesman, Tom Joyce, notes that the government will cancel a student loan only if a doctor signs a form saying the borrower is "totally and permanently disabled." Mr. Stanley says his doctor wouldn't. Without such a signed form, Mr. Joyce says, Sallie Mae's collection unit offers options "to get the loan back on track," and "if that fails, we have no choice but to refer the case" to a state guarantee agency or to the Education Department.
Mr. Stanley says he got a letter this week saying the Education Department had directed the Treasury Department to make automatic deductions toward his delinquent loan from his Social Security disability check, which now is up to $785 a month. The letter didn't say how much the deductions, to begin in March or later, will be. He says the letter did say that the government was permitted to take up to 15 percent of his check, provided the monthly benefit didn't fall below $750.
Federally guaranteed student loans began with President Johnson's "Great Society" campaign. Now two-thirds of students at private four-year colleges have them, averaging $17,000 at graduation, says the American Council on Education, which represents college and university presidents. Students who go on to private law, medical or other professional schools end up owing an average of almost $74,000. The Education Department opened the program to higher-income families in 1992. Loans outstanding have tripled over the past decade to $357 billion.
Though the U.S. government makes some of the loans directly, most are made by private lenders such as banks, with the government guaranteeing payment. The guarantees plus federal interest-rate subsidies let lenders offer low rates despite students' scant credit history. The rate on new student loans, set annually and tied to Treasury bills, is now 3.37 percent. Repayment generally begins six months after graduation. The repayment term is usually 10 years, but borrowers can choose a longer one.
If no payments are made for 270 days, loans are in default. Then state agencies — which both administer the loans and offer lenders an initial guarantee — will try to collect. If they can't, they will kick the loans back to the Education Department. The department has a stable of collection firms it uses. Under federal law, the collectors are entitled to 20 percent of what they recover. Those fees are added to borrowers' loan balances.
Four years ago, the collectors started using a national directory of the newly employed compiled from employers' filings with state employment divisions. That has helped in tracking down defaulted student-loan debt, which now totals $30 billion.
In 1998, largely unnoticed, the federal law governing the loans was changed so borrowers could shed them in bankruptcy only by proving it was an "undue hardship" to repay. Student loans thus joined a rarified class of obligations, such as child support and restitution in criminal cases, that can almost never be shirked. It is a very hard test to meet, as cases such as Carol Ann Race's show.
In the 1980s, Ms. Race borrowed $20,000 to study theology and philosophy at the University of St. Thomas in St. Paul, Minn., and another school. Now 42, she has five children, ages 4 through 11. Two are autistic.
Her husband earns $18,000 a year as a nursing-home aide. The family of seven lives in Bertha, Minn., on $28,000 a year, including government disability payments to the autistic children. Ms. Race says she made $300 monthly payments on her student loan for 2 1/2 years before she lost her job as a religious educator in a church in 1994.
She filed for bankruptcy in hopes of getting the loans — the family's only debt — canceled. A year ago, U.S. Bankruptcy Court Judge Dennis O'Brien ruled against her. In an interview, the judge says he wanted to let her out of the loans but was sure he would be reversed on appeal. His opinion said that because of higher-court rulings, he couldn't cancel her student loans unless he found that repayment would "strip Race or her family of all that makes life worth living."
At the end of her case, Ms. Race owed $34,000 at 7 percent interest. Pursued by two state agencies that made the initial guarantee on her loans, she has signed up for a repayment program with a 5.125 percent rate; the payments will be linked to family income. She says she will be paying the debt for decades, making it difficult to set aside money to care for her children.
"I always felt if I could get a judge to listen to me, it would be simply gone — they would forgive the loan," Ms. Race says. "Anybody who has any heart at all could see that our circumstances weren't brought about by our actions or our foolishness."
Over the years, some bankruptcy judges have opposed the rule tightening. Bankruptcy Court Judge A. Jay Cristol, who presides in southern Florida, sees the policy as "way too harsh." The Education Department's Ms. Shaw says the government should make it tough to get out of student loans because taxpayers have already given the borrowers a valuable asset, an education, and it isn't collateral that can be repossessed.
In the mid-1990s, a federal commission taking a broad look at the bankruptcy code said education-loan abuses cited by lawmakers were infrequent, "more perception than reality." The panel, mainly lawyers specializing in bankruptcy and related fields, recommended treating student loans like other consumer debts in bankruptcy.
But not long after, in 1998, Congress tightened the bankruptcy treatment of student loans. The change resulted from wrangling over an education bill, says Henry Sommer, editor in chief of Collier on Bankruptcy, a legal reference work. The Clinton administration was seeking a reduction in student-loan interest rates, a move lenders opposed. The administration agreed to provide a subsidy to cushion the rate cut for them. At the same time, the government changed the treatment of student loans in bankruptcy, which would mean smaller losses for the Education Department and taxpayers.
That leaves borrowers like Jonathan Gerhardt, 46, little choice but to pay. He is a cellist. The child of two classical musicians in Columbus, Ohio, he studied at the New England Conservatory of Music, performed with two city orchestras and finally won a spot as principal cellist at the Louisiana Philharmonic Orchestra in New Orleans. Despite climbing this high in his field, he was earning just $20,000 a year three years ago, including pay for teaching cello at Tulane University. He buckled under his $100,000 in student loans and filed for bankruptcy.
Lawyers for the Education Department and a guarantee agency that held some of the loans sought to make him pay. The opinion of a bankruptcy court in New Orleans says the lawyers told the court Mr. Gerhardt could trim his expenses, such as $23.90 a month for Internet access and $48.51 for a gym membership. They also suggested he get rid of his cat to save $20 a month.
Bankruptcy Judge Jerry A. Brown, however, said Mr. Gerhardt had to work out to relieve back pain from playing the cello, and needed the Internet to look for extra work. "Expenses related to his cat are not luxuries, considering he is single and lives alone," the judge wrote. He ruled that repaying the loan would be an "undue hardship" and expunged it.
The Education Department appealed. A federal appellate court sided with the government. It suggested Mr. Gerhardt find a job as a music-store clerk.
Mr. Gerhardt says he is already working 60 hours a week, including rehearsals for the Louisiana Philharmonic, practicing and teaching. He recently moved into an apartment with a roommate, saving $50 a month on rent. He says he stopped taking annual trips to Ohio to visit his 81-year-old mother, and doesn't believe he will ever be able to support a family or afford a house. Mr. Gerhardt says he is now paying $200 a month toward his loan. The government wants $900.
"I wish I had known it would be like this," he says. "I would have gone to a less-expensive graduate school. I will be paying for this for the rest of my life."
Rendell finds Sallie Mae's $1 billion bid for PHEAA 'intriguing'
The nation's largest student lender, Sallie Mae, has offered $1 billion to take over the Pennsylvania Higher Education Assistance Agency, a government office long known for its cut-rate college loans.
Higher education officials wonder how Sallie Mae can match PHEAA's lack of fees and favorable repayment terms, and agency officials said a takeover by Sallie Mae would hurt students.
"The bottom line is they make money from students and families," said Keith New, a PHEAA spokesman. "Therefore, its long-term success requires bigger profits from students struggling to pay for their higher education."
Founded in 1964, PHEAA manages $45 billion in loans and state education funds. This includes $3.1 billion in federal Stafford and KeystonePLUS loans made last year for 428,000 students and parents, and $356 million in state grants for 150,000 students.
Pennsylvania students who get KeystoneBEST -- the state equivalent of the federal loans -- pay no fees. The fees on Stafford loans range from 1 to 4 percent of the loan amount at other lenders. Parents who get KeystonePLUS loans pay 3 percent rather than the standard 4 percent fee.
In addition, students who have graduated or enter repayment with most kinds of PHEAA loans get an immediate 0.25 percent reduction when they sign up for automatic payments from their bank account. If they make 48 consecutive on-time payments, the remainder of the loan is reduced by 2 percent.
Parents paying off PLUS loans get a 1 percent rebate after the first 24 consecutive on-time payments and an additional 1 percent rebate after 48 consecutive on-time payments.
Under its proposal, Sallie Mae would pay $500 million up front and $100 million annually over five years to manage PHEAA's $45 billion in outstanding loans and service them, a spokesman said Tuesday. Given its size -- nearly $100 billion in loans out -- the corporation said it could do the job more efficiently than the state and keep offering affordable college loans.
Gov. Ed Rendell, who received the unsolicited offer Monday, finds Sallie Mae's bid "intriguing" and has experts reviewing it, said spokeswoman Kate Philips.
But college-bound students and their families fret they might find school loans more expensive, if Pennsylvania's student-loan business gets contracted out to the giant corporation.
"PHEAA loans are very competitive," said Megan Balsley, 22, who graduated in April from the University of Pittsburgh with a bachelor's degree in marketing. In August, she consolidated four student loans into a single $17,000 loan through PHEAA that charges an interest rate of 2.85 percent.
"I have a friend who is paying off his loan at 9 percent," said Balsley, of Pittsburgh's Morningside section. "So getting something under 3 percent was definitely a good thing. I would be concerned if they were to go up."
Formerly named SLM Corp., Sallie Mae was founded in 1973 as the Student Loan Marketing Association. Based in Reston, Va., the corporation has more than $98.5 billion in loans outstanding to more than 7 million borrowers.
"Sallie Mae is one of the largest and most aggressive for-profit companies in the world," PHEAA said yesterday in a statement to Pennsylvania's colleges and universities after Sallie Mae's offer became public. "They are publicly traded on the New York Stock Exchange, have transferred American jobs overseas and market credit cards, cell phones and home mortgages directly to students.
"As a nonunion shareholder-driven corporation, they are compelled to continually increase profits at the expense of students and families."
Higher education officials and consumer groups also wondered about the potential impact of Sallie Mae's proposal.
"If you have a student loan marketplace with less competition, you'll probably have students getting fewer options and less deals as a result," said Kate Rube, higher education advocate for the Washington, D.C., office of the Pennsylvania Public Interest Research Group, a consumer group.
"Sallie Mae is definitely a company that pushes for policies that harm student borrowers," Rube said. She cited the company's interest in preventing students from consolidating their loans and locking in interest rates.
Sallie Mae has gobbled up smaller college funders before. In 1999, it acquired the New England Loan Marketing Association -- or Nellie Mae. It wrote $375 million in college loans the year before that, an amount that should grow to $1.5 billion this year, said Joyce.
"PHEAA would be a big one, obviously," said Matthew Snowling, an analyst who follows Sallie Mae for Friedman Billings Ramsey, a brokerage firm in Arlington, Va.
"This would enable Sallie Mae to get a toehold in Pennsylvania," he said. Sallie Mae has only a modest share of the Pennsylvania college-loan market, which is dominated by PHEAA. And he worries Sallie Mae would use new-found muscle here to exploit borrowers.
"A student's 3 percent loan through PHEAA is exactly what you'd get from Sallie Mae or anywhere else," said the analyst. The rate is set by the federal government on such lenders if they want to sell their loans to Wall Street. Doing so keeps more money flowing to borrowers.
Sallie Mae would retain the state agency's roughly 2,100 workers, said spokesman Tom Joyce. The corporation currently employs 800 loan administrators in Wilkes-Barre.
"Our proposal would keep in place all of PHEAA's grants, loan-forgiveness and philanthropic programs," Joyce said.
"Sallie Mae asserts they can save the taxpayers tens of millions of dollars on the (loan) servicing side, which is intriguing to the governor because he's always looking at ways to save the taxpayer (money)," Philips said.
It is premature to say whether Rendell would endorse the outsourcing and present it to state legislators for approval, she said.
"The money we're talking about could provide additional, higher-education funding for thousands of Pennsylvania families, particularly at a time when the state budget is being cut," Joyce said.
Thomas Olson and Bill Zlatos can be reached at tolson [at] tribweb.com or (412) 320-7854.
PHEAA (Pennsylvania Higher Education Assistance Agency): A 40-year-old agency in Harrisburg that provides state grants and guarantees student loans for college students. PHEAA manages $45 billion in grants and loans.
Sallie Mae (SLM Corp.): Founded in 1973 as the Student Loan Marketing Association. Based in Reston, Va., the corporation has more than $98.5 billion in loans outstanding to more than 7 million borrowers.