An intellectual freedom blog with an emphasis on libraries and technology

Sunday, April 22, 2012

Student debt crisis

Maybe now people can see the obvious. A recent article in Protester's furious new front, documents the history of the student loan programs and how it turned into a corrupt and deceitful industry. This also led me to a new (to me) web site: Starting in 2009 student loans surpassed credit card debt in the U.S. at $830 billion (footnote: Wall Street Journal). Browse through the stories on this site. Check out the footnotes.

The article is a bit long but well worth reading in full. Here's a couple of highlights:

(The Reagan administration engineered the transition from need-based grants to interest-based loans.)

No one understood the profit potential of this [transition] better than an ambitious Sallie Mae executive named Albert Lord. Within a decade of joining the company as comptroller in 1981, Lord rose to CEO with a plan to take Sallie Mae private and shift the company’s center of gravity from Washington to Wall Street. The desire was mutual. Sallie Mae’s assets multiplied eightfold during the Reagan years. Investors were salivating over the chance to get a piece of Sallie Mae’s expanding $15 billion portfolio of government-backed loans.
In 1993, [President] Clinton instituted the Direct Loan program in the Department of Education. The intent of allowing the Department of Education to issue loans was to cut out middlemen like Sallie Mae and save money. But the industry’s friends in the newly Republican Congress successfully undermined the program. 

Oh, thank you for that. With this assistance from Newt Gingrich's Republican Congressional majority Lord took Sallie Mae public in 1996. He had a personal fortune of $230 million by the early 2000s. And it gets worse:

Sallie Mae had just spearhead the lending industry’s lobby effort behind the 2005 Bankruptcy Act, which stripped private student loans of bankruptcy protection. (Such protections around federal loans had long been chipped away.) Leading the effort in Congress was Lord’s golfing buddy and current majority leader, John Boehner. It was around this time that Sallie Mae hired Boehner’s daughter as an executive at one of its largest collection companies. Sallie Mae remains the largest donor in the history of Boehner’s PAC...

Yes, that John Boehner.

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