Posts Tagged ‘corruption’

Sallie Mae Plan Means $4-8 Billion Less for Education

Thursday, December 3rd, 2009
"you can dress this up 100 different ways and put a Santa Hat on it, but this is still the same budget gimmick lenders have been pushing for months to line their own pockets" - Rep. George Miller

"You can dress this up 100 different ways and put a Santa Hat on it, but this is still the same budget gimmick lenders have been pushing for months to line their own pockets" - Rep. George Miller

The Congressional Budget Office (CBO), at the request of Sen. Casey, just examined the alternative to the Student Aid and Fiscal Responsibility Act (SAFRA) written by Sallie Mae. The last time the plan was examined by the CBO, it found that it would mean $13-17 billion less in grants for students, investments in community colleges, funding for early learning programs, etc.

This time around, the CBO put that number at $4 billion.

But, as Rep. Miller said in a press release earlier today, “you can dress this up 100 different ways and put a Santa Hat on it, but this is still the same budget gimmick lenders have been pushing for months to line their own pockets with billions of dollars that should be used to help students.”  Both Rep. Miller and Sen. Harkin—Chairmen of the House and Senate education committees, respectively—pointed out that Sallie Mae was able to do better with the CBO this time because the lenders had their plan “sunset” after five years, while SAFRA is calculated for 10 years.

The lenders will, undoubtedly, fight for their plan to be continued in five years, which would mean at least $8 billion less to invest in education. (more…)

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Iowa Lender Fails Again, Proving the Need for Reform

Wednesday, October 7th, 2009

53213877_55b736f882We didn’t think we needed any more proof that the Senate student aid bill is absolutely vital for protecting the finances of college students nationwide, but recent developments in Iowa put the icing on the corrupt lending cake.

The public learned Tuesday of the second judicial ruling against Iowa Student Loan Liquidity Corp. in a month. We now know conclusively that between 2004 and 2006, the private, “nonprofit” ISL lied about its eligibility for particular federal subsidies. So now it owes the government $2.4 million.

This is on top of the $15.76 million it was ordered to repay last week after courts discovered that ISL inexcusably used illegal bribes to increase business.

These crooked and predatory lending practices are despicable. They clearly display the need for better loan company regulation and more trustworthy financial options for cash-strapped students. Now it is the Senate’s turn to be appalled and make a change. Take a stand and show them that you demand better protections from companies like ISL. You can easily Tweet, email, fax or call your Senator today to express your support for the student aid bill.

The current system simply can’t continue. As young people, we need to safeguard our future.

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Sallie Mae Subsidiary Cheated Taxpayers Out of $22.3 Million

Wednesday, August 5th, 2009

dirty-money2The Education Department’s (ED) Inspector General (IG) released a report on Monday claiming that Nellie Mae, a subsidiary of loan giant Sallie Mae, improperly received $22.3 million in taxpayer subsidies from ED between 2003 and 2006. The report is the latest episode in what has come to be known as the “9.5% scandal,” in which student loan companies continually refinanced certain loans which were eligible for additional federal subsidies.

The IG recommended, among other things, that ED force SLM to pay back the ill-gotten subsidies. So far, only NelNet has been forced to return these kinds of improper payments, and even this company was allowed to keep nearly three hundred million dollars in improper payments.

I hope that Obama’s ED does not follow in the foot steps of the Department under President Bush. They should make sure that no one can raid the American treasury and keep the booty.

Unfortunately, Sallie Mae and other student loan companies are also getting rich from wasteful—but totally legal—government subsidies. Luckily there is now a plan in Congress, originally proposed by President Obama, to eliminate all wasteful subsidies to student loan companies and use the $87 billion in savings to make college more affordable and accessible. The loan companies have already spent millions lobbying against it, so it is really important that Congress hears from you.

* Cross-posted at Students over Banks

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Another Student Loan Scandal?

Thursday, April 30th, 2009

Our friends over at Higher Ed Watch got the scoop today on what could turn out to be yet another student loan scandal in the Federal Family Education Loan Program (FFELP). While a full investigation is still in order to determine whether wrong doing took place, this news is yet another example of why adopting the president’s proposal to phase out the FFELP, which includes wasteful subsidies to student loan companies, and use the estimated $94 billion in savings over ten years to expand student aid.

Higher Ed Watch found evidence to believe that the South Carolina Student Loan Corporation, the state’s loan agency, and the South Carolina State Education Assistance Authority, the state’s Guarantee agency, worked together to deny some students federal loans in order to take advantage of the Lender of Last Resort program. Under the program, loan companies are not liable for a single cent if a loan that they make goes into default, unlike regular loans made under the FFELP where the lender is on the hook for 3% of the loan, and the government covers the other 97%.

The program is rarely used because very few students are ever denied loans under the FFELP (the government assumes nearly all of the risk anyway, after all). The Department of Education is aware of the situation, and conducting a review of the program. 

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