By Juan Wilson on 18 March 2009
Sallie Mae began life in 1972 as a GSE (Government Sponsored Entity) like Freddy Mac. It was created to serve young college students. Since the Bush Administration came into power it has preyed on them.
In November, 2005, former Sallie Mae employee Michael Zahara filed a federal lawsuit against the company, alleging that it had a pattern and practice of granting forbearance in a purposeful effort to increase total student loan debt. That lawsuit is still ongoing.
image above:" X-Generation" portrait by Hannu Eskelinen
In February, 2007, New York Attorney General Andrew Cuomo launched an investigation into alleged deceptive lending practices by student loan providers, including The College Board, EduCap, Nelnet, Citibank, and Sallie Mae. (see http://en.wikipedia.org/wiki/Sallie_Mae).
This private corporation has morphed from a public service for students to a pernicious corporation both lending and acting as a collection agency. Sallie Mae profits most from students inability to payback their loans.
On 27 February 2009 Bloomberg News reported that President Barrack Obama and his Education Secretary Arne Duncan plan to end government subsidies to third-party lenders and establish the federal government as the sole provider of federal student loans. The would represent 74% of the loans of Sallie Mae's (Student Loan Marketing Association) loans. Not a bad idea. As a for profit operation with guarantees from the public funds, it ought to go away.
I don't think that the Obama Administration has gone far enough. If they want a real stimulus package that will bring hope to the young to strive for a new and better life I advise that we forgive all student debt in exchange for a short period of public service.
This could get some useful work done and unburden our young to withering debt obligations. It would be expensive. Recent college graduates from four year colleges had a debt exposure on average of $12,000. As of 2002, there were about 11-million such students a year. That's about 130 billion a year. If we were to forgive all student debt it would likely cost over $500 billion dollars. Yeah. Really expensive.
I still think it is a better investment than continuing to bail out the Titanic. It would be a kindness that would help to heal the generational wounds that have separated the boomers from the exers. It would give them a jolt and allow them to move on to solve how we will carry on after the Starbucks and Burger Kings are gone.
One thing I'll bet on - the young people will be around longer than AIG or CitiGroup.
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