The Profit and the Pauper

I'm no fan of big government but, nevertheless, turning the student loan program into a rapacious, for-profit enterprise is such a disgrace...

“Sallie revolutionized the industry,” says Representative Miller, and he  doesn’t mean that as a compliment. It imposed fees and penalties that added  costs when students were already having trouble repaying loans — while  increasing Sallie’s profits. It bought its own collection agency. It lobbied  to make it nearly impossible for borrowers to escape their student debt. (It  was aided along the way by occasional reports of the wealthy reneging on their  student debt, thus saddling the taxpayer with the bill.)
 
On one level, what Sallie Mae did under Mr. Lord’s leadership was  consistent with the times. The dotcom bubble was in full flower. The only  thing Americans seemed to care about was whether a company’s stock price was  rising. And Sallie’s was certainly doing that — more than 1,400 percent  between 1995 and 2006. But in our obsession with the market, we had forgotten  that this stock’s performance resulted in no small part from Sallie Mae — like  many of its competitors — making money on the backs of struggling college  graduates. It was a little like the credit card business: the “best” customers  aren’t the ones who pay off their monthly charges on time; they’re the ones  who can’t. For the student loan industry, the best customers are the students  who take on more debt than they can handle to get through school. What’s been  lost is the idea that student loans are a service with benefits that transcend  the financial.
 
Meanwhile, Mr. Lord, who stepped down as C.E.O. in 2006 and is currently  chairman, was getting rich; between 1999 and 2004, his pay package was worth  $235 million, most of it in stock options. In April, Sallie Mae agreed to be  bought by a private equity consortium for $26 billion. When the deal closes,  as it is expected to in the fall, Mr. Lord will walk off with an additional  $135 million.

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July 29, 2007
Student Loans | Viewpoint

The Profit and the Pauper

By JOE NOCERA <http://topics.nytimes.com/top/news/business/columns/josephnocera/?inline=nyt-per>
www.nytimes.com/2007/07/29/education/edlife/nocera.html <http://www.nytimes.com/2007/07/29/education/edlife/nocera.html?pagewanted=print>

I GRADUATED from college about $8,000 in debt.