Fannie Mae and Freddie Mac problems: Implications for Sallie Mae?

Parent Cafe
21

<p>Quarantine in this case could mean as much as possible moving their investments, and subsidiaries as much as is possible away from US financial interests. And it seems to be happening given the Euro has now climbed to about 1.60. And some in the European Union (especially the Germans) are beginning to view American financial speculation (which would include the SL bubble) as being reckless, irresponsible and the product of poor regulation. </p>

<p>And with Sallie Mae getting out of the English market, I’d wonder if more was involved than the credit crunch. Such as the British government making inquiries, or threatening to do so. SMC has a history of doing just those type of strategic redirections, for example the sale and move away from a public holding when investigations were threatening here in the US. Or the temporary removal of A. Lord when the PR was getting too bad. </p>

<p>Plus the Brits would be in a difficult political spot insofar as SMC co-opting their educational funding systems. The Brits have the Irish and Australian higher education systems in their cultural locus, both of which work much better than the American model. </p>

<p>The Canadians are also beginning to resent the presence of subsidiaries and models derived from the US edudebt industry, to the extent they have some very active consumer rights organizations about the matter. Even in India there seems to be some serious tensions about the issue, although I’m not quite sure what is the exact situation. And I don’t currently know anyone from India that can be asked about the matter. </p>

<p>And since SMC has so many subsidiaries it tends to make reforms or inquiries into their activities difficult in the US. However overseas resentments are building about world economic troubles and many believe these are directly attributable to US economic problems. It’s likely some reactions are brewing. It’s could be possible that SMC could be asked (or told) to leave the countries where the resentment is especially marked.</p>

<p>The following is a partial list of their SMC subsidiaries, shadow companies and otherwise… (from website salliemaebeef.com admittedly an activist website, but SMC isn’t especially free with this type of information) </p>

<p>2% EdvantageSM
2Futuro®
2Futuro® (logo)
A Higher Degree of Talent®
A True Partner in Asset Recovery®
Absolute Zero ProgramSM
Absolute ZeroSM
Academic Management Services®
Affinity Loan ProgramSM
Aim TrueSM
AllianceSM
Alternative Loan ProgramSM
ALTSource®
AMS®
AMS® (logo)
AMS Easysave PLUSSM
AMS Education Loan Trust®
AMS Webaccess®
App SacksSM
AppTrakSM
Arrow Financial Services & Design® (logo)
Arrow Financial Services®
Arrow Financial ServicesSM (Australia)
Arrow Financial ServicesSM (European Community)
Arrow Financial Services (Turkey)®
Arrow GlobalSM
Arrow GlobalSM (logo)
Arrow Global A Sallie Mae Company (logo)®
Arrow Global® (Japan)SM
Arrow Poland®
Ask a Counselor®
AutoChekSM
Bar Study Loan®
Be Brilliant With Student Loans®
bedebtsavvySM
Building Hope: A Charter School Facilities Fund®
Campus Assist®
Campus Gateway®
Campus GatewaySM (logo)
CampusBusinessSM
Care for MarylandSM
Care for Oregon®
Care for VirginiaSM
Career Training LoanSM
Cash BackSM
Champions for Higher EducationSM
CircuitSM
CIREDITSSM
CLASS®
Collectively Speaking®
College AdvantageSM
College Answer: Knowledge for CollegeSM
College Answer®
College RelianceSM
College Savings Accelerator®
Collegeanswer.com®
Collegeanswer.comSM (logo)
CollegeServ®
Collegiate ConnectionSM
Community College LoanSM
Connect USASM
Connect®
Corporate Partnership ProgramSM
Custom Campus Solutions®
Debt Management EDvisorSM
Debt Management SolutionsSM
Delivering What Matters Most®
Dentist Advantage Loan Program®
DENTSource®
Direct Repay PlanSM
Direct RepaySM
DOCSource®
EAGLE IITM
EAGLETM
EdNotes®
EdNotes® (logo)
EdTech®
Educacion a Tu Alcance®
Education Leads Us®
Education Leads Us® (logo)
Education Lending Training ConferenceSM
Education Resource CenterSM
Educational Advantage®
EduSource®
eFAO®
eFAO® (logo)
EmployeesFirst Source for Education®
Everything You Need To Get Ahead®
EXCEL Custom®
EXCEL Education LoanSM
EXCEL Grad Extension LoanSM
EXCEL Grad LoanSM
EXCEL Preferred®
EXCELSM
Executive MBA LoansSM
ExportSS®
Express OnlineSM
ExpressLoanSM
F.E.E.D.S.SM
Financing Your Lifelong Goals®
FINMAN®
FinPlan Forum®
First Class Teacher Award®
First In My Family®
FLAGSSM
Flex RepaySM
Full Circuit®
FutureCashSM
General Revenue Corporation®
General Revenue Corporation® (logo)
GetLoanStatus.comSM
GetYourLoanStatus.comSM
Giving Back Volunteers® (logo)
Global Health Education LoanSM
Global Health Education Loan ProgramSM
Global Health Private LoanSM
Global Health Residency and Relocation Loan®
Grad Choice Account®
Grad Rewards®
GRADADVANTAGESM
GRADEXCEL®
GradSource®
Graduation Bonus®
GRC® (logo- stylized)
GRC®
Great ReturnsSM
Great Rewards®
GRP Financial Services CorporationSM
GRPSM
GRPSM (logo)
HEAL Relief®
Heal RewardsSM
Helping Make Education Possible®
Hit your MarkSM
Idaho First®
Imagine the Possibilities®
International Health Education LoanSM
iReward®
Job Skills Training Loan®
Jump Start Plus®
Jump Start®
K-12 Family Education LoanSM
K2C®
Keeping Your Focus On Student SystemsSM
Kids to College®
Kids to College® (logo)
Knowledge for CollegeSM
Laureate and Design®
Laureate®
Law Loans Private LoanSM
LAW LOANS®
Law RewardsSM
Law Student LoanSM
LAWLOANS Direct Repay®
LAWLOANS Express®
LAWLOANS Private LoanSM
LAWLOANS Rewards®
LAWLOANS®
Lender Funds ManagementSM
Loan LinkSM
Loan SurvivorSM
LoanSense®
Louisiana Lagniappe®
Love Work. Love Life.®
Manage Your LoansSM
MBA LOANS Direct Repay®
MBA LOANS Express®
MBA LOANS Private LoanSM
MBA LOANS Rewards®
MBA LOANS®
MEDEX RewardsSM
MEDLOANS Consolidation Cash BackSM
MEDLOANS Consolidation LoanSM
MEDLOANS Consolidation RewardsSM
MEDLOANS Direct RepaySM
MEDLOANS Healthier ReturnsSM
MEDLOANS RewardsSM
Nellie Mae®
Nellie Mae A Sallie Mae Student Loan Company Logo®
Nellie Mae Cash Back®
Nellie Mae’s Financial Success seriesSM
Nellie Mae GradPLUSSM
Nellie Mae’s Parent Resources for Educational Preparation (PREP)SM
Net WizardSM
Net.PaySM
Net.RepaySM
Net.Shop®
Netback AdvanceSM
No Fuss PLUSSM
No Wait RebateSM
Nobody Lends You More Support®
Nursing Advantage Loan Program®
Office WizardSM
Online Loan ConnectionSM
Opening Doors to Higher Education®
Opening the Next Door to Your FutureSM
OpenLineSS®
OpenNet®
OpenNet® (logo)
Oregon First®
Outreach Counseling®
P in Pioneer Credit Recovery® (logo)
PaybackSM
Payment AdvisorSM
Pennsylvania Rewards®
Personalized Solutions That Work For You®
Pharmacist Advantage Loan ProgramSM
Pharmloan®
Pioneer Credit Recovery, Inc.®
Pioneer Credit Recovery, Inc.® (logo)
Pioneers in Client Server SystemsSM
PLUS By PhoneSM
PLUS By WebSM
PLUSback®
PLUSShare®</p>

<p>PortSS®
Powered by Sallie Mae®
Powered by Sallie Mae® (logo)
Priority Loan®
Private Consolidation Loan®
Private LineSM
Relationship Focused, Results Driven®
Repayment AnswerSM
Rewards PLUSSM
Rising Sun® (logo)
Sallie Mae®
SallieMae® (logo)
Sallie Mae (Argentina)®
Sallie Mae (Australia)®
Sallie Mae (Brazil)®
Sallie Mae (Canada)®
Sallie Mae (Chile)®
Sallie Mae (European Community)®
Sallie Mae (India)®
Sallie Mae (Japan)®
Sallie Mae (Mexico)®
Sallie Mae (Republic of Georgia)®
Sallie Mae (Republic of Korea)®
Sallie Mae (Singapore)®
Sallie Mae (Turkey)®
Sallie Mae (WIPO)®
Sallie Mae 10K®
Sallie Mae 10K® (logo)
Sallie Mae AdvantageSM
Sallie Mae Bank®
Sallie Mae Cash Back®
Sallie Mae Community College LoanSM
Sallie Mae Cup®
Sallie Mae DENTALoans®
Sallie Mae Debt Management Operations®
Sallie Mae DMOSM
Sallie Mae Education Trust®
Sallie Mae Education Trust®
Sallie Mae Extra CreditSM
Sallie Mae Financial®
Sallie Mae Financial® (logo)
Sallie Mae Home Equity Line of Credit®
Sallie Mae Home Loans®
Sallie Mae Home Loans® (logo)
Sallie Mae How to Pay for College®
Sallie Mae MallSM
Sallie Mae MallSM (logo)
Sallie Mae Mortgage®
Sallie Mae Mortgage® (logo)
Sallie Mae Newslink®
Sallie Mae Plus SuccessSM
Sallie Mae Private LoanSM
Sallie Mae Rapid Returns®
Sallie Mae Solutions®
Sallie Mae l UK® (logo)
Sallie Mae UK Education Loan®</p>

<p>Sallie Mae UK Education Loan Programme®</p>

<p>Sallie Mae Valley Classic Races®
Sallie Mae Valley Classic Races® (logo)
Sallie Mae’s 1-2-3 approach to paying for collegeSM
Sallie Mae’s Business Office Suite®
Select PLUSSM OnlineSM
Select PLUSSM ServiceSM
Select Step®
Select Your TermsSM
SEPSM
Service Excellence ProgramSM
Service Makes The DifferenceSM
Signature Associate LoanSM
Signature Education Loan®
Signature Express Online®
Signature Express®
Signature Grad Loan ProgramSM
Signature PharmloanSM
Signature Select®
Signature Student Loan®
Signature Student Rewards®
SLFA®
SLM (stylized)®
SLM Corporation®
SLM Education Credit Finance Corporation (ECFC)SM
SLM Financial Corporation®
SLM Financial Corporation® (logo)
SLM FinancialSM
SLM FinancialSM (logo)
SLM Financial® A Sallie Mae Company (logo)
SLM Holding Corporation®
SMART AdvantageSM
SMART LOAN®
SMART LOAN® (logo)
SMART Options®
SMART Rewards®
SmartDataSM
SmartDataSM
SMSC Honors®
Solutions for students. Solutions for schools.®
Solutions for them. Solutions for you.®
Southwest Student Services Corporation & Design®
Southwest Student Services CorporationSM
Southwest Student ServicesSM
SSSCSM
Student AnswerSM
Student Excel®
Student Loan Boot CampSM
Student Loan Counseling SoftwareSM
Student Loan Funding Cash BackSM
Student Loan FundingSM
Student Loan FundingSM (logo)
Student Loan WorkshopSM
Student SuiteSM (logo)
Student Web SystemsSM
Success By Sallie MaeSM
Swiftpay®
SwiftpayTM (Arizona)
Take the next step into your futureSM
Teach for Maryland®
Teach for Oregon®
Teach for Virginia®
Teacher Advantage Loan Program®
Technology for the Business of EducationSM
The #1 Paying for College Company®
The American Dream: Paying for College TourSM
The Experts in Student SystemsSM
The Fall ForumSM
The Informed SourceSM
the planning for college destinationSM
The Research Assistant®
The Research ToolkitSM
The Sallie Mae Fund®
The Sallie Mae Idea Lab®
The Sallie Mae SourceSM
The Science Behind CollectionsSM
The Science Behind Consumer Debt Purchasing®
There For You®
ToAnyDegreeSM
TransferAnswerSM
TransportSS®
True Fee®
Trust for Education®
Tuition Answer®
Tuition Answer® (logo)
Tuition Answer. A Sallie Mae Education LoanSM
Tuition Answer. A Sallie Mae Education LoanSM (logo)
Tuition Loan Program®
Tuition Payment PlanSM
TuitionPay & Design®
UnderPrimeSM
Unity USASM
Unlocking your FutureSM
Un-Met Need ScholarshipSM
Upromise®
Upromise® (logo)
Upromise Loan LinkSM
USA Education®
USA Group Enterprises®
ViewSASM
Washington First®
We Consider You FamilySM
Web Bonus®
Web BonusSM (logo)
Web Loan DeliverySM
We’ve Got Money to Learn®
What’s Up With My Loan?SM
Where the World is GoingSM
Where’s My Money?SM
WhizFund and Design®
WhizFundTM
Whizfund® (logo)
WhizkidSM
WhizKid® (logo)
WhizKid for Windows®
WiredScholar®
WiredScholar® (logo)
WiredScholarship®
Your Electronic AwardSM
Your Informed SourceSM
Your Student Loan Funding.com®</p>

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<p>To Atana: I just saw your most recent post after having been away from my computer since last night. Thank you for your explanation (about quarantining), information, and reference to salliemaebeef.com. (which I will look at after I post this reply).</p>

<p>I don’t shock easily, but your partial list of Sallie Mae subsidiaries and shadow companies took my breath away. I was especially shocked to see that Sallie Mae operates in so many foreign countries. (The UK article I cited in my previous post led me to conclude that the UK was the only foreign country in which Sallie Mae was administering student loans.) As stated in my initial post, much of what I’ve heard about Fannie Mae and Freddie Mac defies logic and common sense. So does your list. I don’t understand how any institution can be scattered and splintered, and not risk being vulnerable to mismanagement and related financial problems. (I am going to randomly research some of the listed subsidiaries and shadow companies to see how well–or how poorly–they operate.) I guarantee that my daughter will be equally shocked when she sees your list. This is the sort of information student borrowers need to know. </p>

<p>In your Post #19, you described the current financial situation as “almost surreal.” I agree. I watched and listened to CNBC all day yesterday (I have it on right now) to keep up with breaking news, and to continue learning financial terminology. The more I see and hear, the more bizarre this situation seems to be. For example, I learned yesterday that Anheuser-Busch was just bought by a foreign company; I learned this morning that General Motors is being restructured in an attempt to stave off possible bankruptcy. (Again, I’m shocked. A-B and GM are U.S. corporate heavy-hitters!) I’ve also heard that approximately 150 more banks are expected to fail. I’m bothered by the fact that this sort of financial news is “breaking.” Common sense tells me that the financial problems of the sort I’m hearing about now did not happen overnight; they must have been brewing for a long time. Either the companies and institutions in financial trouble have been exceptionally circumspect about their financial problems, or the media have been (perhaps intentionally) dropping the ball.</p>

<p>In your Post #15, you mentioned a “circular toxicity” to this situation as it applies to colleges and college students. Common sense tells me that if an increasing number of high school graduates forego applying to college, and if an increasing number of college applicants and continuing students need federal loans in order to attend college, and if federal student loan programs are curtailed or cancelled, then financially needy college students will be dropping out. The college drop-outs will join the high school grads who never applied to college, and both groups will be looking for jobs. If there aren’t enough jobs available to accommodate them, these young adults will be unable to support themselves, and will end up on welfare. Whether these young adults apply to and stay in college (with federal loans), or they lose their federal loans, drop out of college, and become involuntarily unemployed, the government pays. It makes more sense to me for the government to help students stay in college, where students will acquire the knowledge and skills to become more employable, more likely to become financially self-supporting, and be better contributors to the economy.</p>

<p>What a mess.</p>

23

<p>Can anyone explain in very basic terms what the near future of Student Loans might be like in a semi-worse case scenario? (Not a complete collapse, but perhaps a partial?)</p>

<p>I’m working on the assumption of sending our kids to college on a combination of parental funds, saved student funds, and modest student loans (not co-signed by parents). Do we need to rethink this combination in a semi-worse case scenario?</p>

<p>Annika</p>

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<p>I just read that the SEC has ordered naked short positions closed on Fannie, Freddie, Lehman and primary dealers. Seems like a desperation move to prop up share prices. It frequently works in the short-term. I wish that the SEC would just enforce their own rules when it comes to naked short-selling. They just seem to use it on their own companies.</p>

25

<p>Timecruncher, Yes it does make more sense for the government to help to keep students in college. In the long term it benefits the economy of the entire nation. That’s why other countries do not use the US model for higher education funding. </p>

<p>The problem is that government is no longer distinct from corporate interests in regards to higher education policy and funding. The USDOE is literally a suburb of the larger companies such as SMC and NNC. It’s a difficult condition to explain to those who graduated prior to the privatization/corporate consolidation of control over higher education funding. They still have fuzzy memories of the days when such as Sallie Mae were government sponsored enterprise and not corporate monoliths. But these trends have been developing for some time, for example the consumer rights for bankruptcy and student loans (subsidized) were stripped clear back in 1978. </p>

<p>As that long list of subsidiaries makes very clear, what happened is that SMC (and other companies) used their access to government money, and their insider protections to massively expand. As you noted, this type of over expansion does indicate potential lack of financial oversight. Which in some cases could be deliberate, insofar as the various consumer rights groups or politicians who have tried to make inquiries into the student loan swamp usually don’t succeed. Either because they can’t find the money or they don’t want to disturb the financial waters. </p>

<p>Problem is, what made SMC’s monolithic presence ultimately possible has been the economic marginalization of an entire generation of students. </p>

<p>Concerning partial collapses of the educational funding systems, to some degree it’s already begun. But congress will have a dilemma insofar as another bailout is going to be read as a massive influx of corporate welfare. And that bailout money will ensure that funds for expansion of grant programs and non-corporate loans will not exist. Problem is most in congress have taken substantial donations from the edudebt industry, and so are in their vest pocket. They certainly don’t have the students interests as a primary concern.
The following quote is from Stephen Burd’s article in the Chronicle of Higher Education about donations and the effect on policy decisions, it was written several years ago (2004) but nothing has really changed.
"A Chronicle investigation reveals that over the last year and a half, officials with the loan industry and proprietary institutions have given, individually and through political-action committees, or PAC’s, almost $1-million in campaign contributions to the 49 members of the House Committee on Education and the Workforce, according to Federal Election Commission records through the end of May…One lobbyist for a company that was a big contributor to the committee, who wanted to remain anonymous for fear of offending the congressmen, compared the process to a less savory profession. “It’s like in the mob,” the lobbyist said. “To get ahead, you have to be a good earner for your team.”</p>

<p>Which could account for the mysterious absence of comments about this issue by those currently running for office. In addition to the financial wrecks this industry has caused for thousands of former students the entire situation is now building up to a major economic crises. But somehow our esteemed leadership feel compelled to say nothing…</p>

26

<p>BCEagle, in regards to the SEC’s seeming abrogation of regulatory responsibilities could that also be a factor in the handling of the SL companies?</p>

<p>They have been playing in the murkier waters of the secondary bond market, and in one instance investors have been badly burnt and there was some brief murmurings about investigations.</p>

27

<p>Naked short selling is more of a matter of share price than it is in operational matters. I don’t have the highest opinion of the SEC.</p>

28

<p>It appears that loss of respect regarding the SEC is well justified. In regards to the continuum of financial influence peddling there no longer seems to be an interest by government regulatory bodies to actually do their stated mission.
Gods know SEC isn’t doing their job, and the USDOE is so rife with influence peddlers from the very industry they’re supposed to regulate for the good of students…that incest would seem to be a more appropriate word than policy. </p>

<p>The below is from the June 25th Higher Education Watch, from the New America Foundation. And it’s incredible, but not entirely surprising that these type of schemes are permitted to propagate especially since the only way that these can happen is with outright collusion by governmental officials. </p>

<p>It’s very disappointing however that we have to rely on specialist press such as Higher Education Watch, or Chronicle insofar as fairly few outside the field read these sources. If these scandals and schemes were covered by larger media outlets there’d likely be a hue and cry to reform the situation before it all collapses. It may already be too late for many student borrowers, as their rights have been so compromised as to be irrelevant. But because of the profiteers we’re probably looking at the systemic collapse of higher education funding. The moral collapse happened some time ago…</p>

<p>Stephen Burd -
June 25, 2008 - 2:08pm</p>

<p>Too many times of late, we have seen mainstream journalists fall for the spin of lenders, who in the wake of the credit crunch have had a vested interest in raising panic levels about the availability of student loans.</p>

<p>That’s why it’s such a pleasure for us to see good, critical, and insightful reporting on the loan industry receive the recognition it deserves. Case in point: Paul Basken, a senior reporter at The Chronicle of Higher Education, has received a National Press Club award for a revealing piece he wrote last May showing how the revolving door between the Bush Administration and the student loan industry brought great rewards to Sallie Mae and put financially needy students in harm’s way. [Disclosure: the author of this post used to work for the Chronicle.]</p>

<p>We wrote about Basken’s article last year. But at a time when the student loan scandals of yore are fading fast from memory, we felt that it was important to remind our readers of just what he found. The conflict of interest that he uncovered still exists and needs to be dealt with.</p>

<p>Going to Bat for Sallie Mae</p>

<p>The Chronicle article revealed that Matteo Fontana, a high-ranking official in the Department of Education’s Federal Student Aid office, made “a controversial and high stakes legal ruling” in December 2004 that greatly benefited Sallie Mae, his former employer, the day before the company officially broke its ties with the federal government and became a private corporation. In fact, Fontana’s action essentially removed the last obstacle to the company’s long-sought transformation. [Yes, this is the same Matteo Fontana who was at the center of a Higher Ed Watch investigation that found that he held 10,500 shares of insider stock from Student Loan Xpress. Nearly 15 months later, Fontana remains on paid administrative leave pending the outcome of a Department investigation.]</p>

<p>In his ruling, Fontana rejected an opinion offered by the Department’s Inspector General (IG) two years earlier that a lucrative arrangement that exists between Sallie Mae and USA Funds, the country’s largest guarantee agency, violated the law and needed to be severed in order to protect borrowers.</p>

<p>Sallie Mae’s relationship with USA Funds dates back to 2000 when the loan giant purchased the guarantor’s parent company, USA Group, which had been one of its largest competitors.</p>

<p>On its face, the sale didn’t give Sallie Mae control of USA Funds. Under federal law, for-profit lenders, such as Sallie Mae, are not allowed to own nonprofit entities such as guarantee agencies. That prohibition makes sense because the Higher Education Act puts guarantors in charge of overseeing loan providers – making sure, for instance, that lenders do everything required to keep borrowers who are delinquent on their loans from defaulting.</p>

<p>Sallie Mae, however, found a creative way around the restriction. While the loan company’s purchase didn’t include USA Funds, it did gain control of USA Group Guarantee Services, a for-profit subsidiary that provided administrative services to help the guarantor carry out its functions. The deal also required USA Funds to contract its loan guarantee services to Sallie Mae.</p>

<p>USA Funds is now a shell of its former self. Sallie Mae employees carry out most of the agency’s operations. Meanwhile, the guarantor pays Sallie Mae about $250 million a year for staffing and other purposes, according to the Chronicle.</p>

<p>Raising Red Flags</p>

<p>In 2002, the Department’s IG raised a giant red flag. Sallie Mae’s relationship with USA Funds, the IG’s office wrote, presents “a conflict of interest” that needs to be cured. Because Sallie Mae effectively controls the guarantor, the IG pointed out, there is no independent agency ensuring that the loan giant is doing all it can to ensure borrowers don’t fall behind on their payments. By working hand-in-hand, the two entities actually have a perverse incentive to let borrowers fall behind so that the USA Funds can collect the generous subsidies the government provides guarantors for keeping delinquent borrowers out of default.</p>

<p>What makes the story especially outrageous is that the Federal Student Aid office initially agreed with the IG’s assessment. In March 2004, Fontana sent a letter to USA Funds saying the “conflict of interest” needed to be eliminated. But on the eve of the day Sallie Mae was finally to become a fully private for-profit company, he had a change of heart.</p>

<p>In the follow-up letter he sent that December, Fontana wrote that the Department “had reconsidered its prior position.” He said the conflict of interest did not exist because the Sallie Mae (SLM) subsidiaries that helped manage USA Funds had separate tax identification numbers from other parts of the company. “It is apparent from SLM’s website that SLM regards these subsidiaries as separate corporate entities,” he wrote. Great detective work there.</p>

<p>Basken’s piece showed how Sallie Mae’s friends at the Department went to bat for the corporation, despite having concerns that students could be hurt. Hopefully next year, when the Department’s leadership changes, the agency will revisit this dubious decision and, as a change of pace, put the interests of students first.</p>

<p>Congratulations on the award, Paul. Keep up the good work."</p>

29

<p>To annikasorrensen: Thank you for your post. My family has made a similar college financing plan (although my daughter presently has no savings, but will be working part-time during the school year and full-time during summer breaks). Like your family, my family will now need a back-up plan.</p>

<p>To BCEagle91: Thank you for your most recent posts. As I was looking up the financial terms you mentioned, I heard the term “naked short selling” uttered on television. I’ve had CNBC on since early this morning, and I watched and listened to the Senate Banking Committee hearing. The participants’ comments were often too technical and too complex for me to understand, so I had to rely upon the CNBC anchors’ analyses for clarification. At one point, the CNBC anchors excitedly commented that Sen. Jim Bunning had just challenged Treasury Secretary Paulson with the statement, “Can I believe what you’re telling me about the GSEs?” The CNBC anchors commented that statements as openly confrontational as Bunning’s are out of the ordinary, and therefore, significant.</p>

<p>To Atana: Thank you for your most recent posts. You hit on one reason this situation is such a cause of concern for me. I am fifty-five years old; my “fuzzy memories” pre-date Sallie Mae’s privatization. I was an undergrad between 1971-75, and each undergraduate year, I used federal Work-Study, a National Defense Student Loan, and a state-guaranteed student loan (administered by my hometown bank) to supplement my school-awarded merit scholarship. (My parents, who despised college-educated people, were financially able but unwilling to contribute to my education–an ugly story, the details of which are not pertinent to this thread.) I graduated $10,000 in debt, deferred repayment while in grad school, and then–with an unanticipated string of low-wage jobs–managed to both support myself and repay my student loans in full and on time. (I repaid the NDSL in about half the allotted time.) Those repayment-phase years were financially tough, and in retrospect, I would probably be in better financial shape today if I had started working full-time after high school instead of going to college. College and grad school haven’t yet paid off for me, and I don’t want my daughter to find herself in my financial position when she’s fifty-five. Regardless, I’d rather have my daughter attend college/grad school, and then graduate with “reasonable” federal student loan debt (which I intend to help her repay), than have her federal student loans curtailed or cancelled, leaving her unable to afford to complete her education.</p>

<p>The information you provided about the corporate/political wheeling-and-dealing involving Sallie Mae adds to my concern. Clearly, it’s a bad time to be a financially needy college student.</p>

30

<p>“At one point, the CNBC anchors excitedly commented that Sen. Jim Bunning had just challenged Treasury Secretary Paulson with the statement, “Can I believe what you’re telling me about the GSEs?” The CNBC anchors commented that statements as openly confrontational as Bunning’s are out of the ordinary, and therefore, significant.”</p>

<p>Ron Paul and Barney Frank are two that routinely challenged Greenspan over the years.</p>

<p>“Those repayment-phase years were financially tough, and in retrospect, I would probably be in better financial shape today if I had started working full-time after high school instead of going to college. College and grad school haven’t yet paid off for me,”</p>

<p>You sound articulate and purposeful in dealing with challenges - perhaps those are benefits of your college degrees?</p>

<p>The amazing thing is the amounts of debt today. $10,000 for four years with no family help would be a great number for today. It was a bit hard for me to really consider the numbers today (the real consideration is when you make your first payment - until then, it’s theoretical) based on my experience ($1,000 in loans) way back when. Costs were exponentially lower and grants were more plentiful.</p>

<p>It probably wouldn’t hurt to send letters to your elected officials. It’s pretty easy to do this with many legislators that have forms that you can fill out on their websites.</p>

31

<p>Atana - don’t mean to quibble - but fannie and freddie are overseen by OFHEO -and not the SEC (although the SEC has many a hand in is SPE investments, of which there are too many) and it has been a difficult relationship - one that in my view OFHEO has been on the right side on - they were particularly strident about Fannie’s accounting chicanery - but one must question OFHEO’s effectiveness here. They have been quibbling about single digit billion dollar accounting problems when both organizations are now (practically speaking) levered 50 to 1. This massive amount of leverage is the problem - no business, even one government sponsored, can consistently survive in this leveraged state. Sallie Mae is overlevered too, so the concern about Sallie is valid, although I don’t think they are in the same extreme situation as fannie and freddie.</p>

32

<p>Quite true about the confusion of regulatory agencies. My comments about the abrogation of regulatory responsibilities was aimed at the USDOE in regards to SMC and other companies. But keeping track of which governmental entity isn’t doing it’s job is getting difficult. And the intertwining of these companies does make it difficult to trace out the spiderwebs. And given the long list of SMC subsidiaries its very possible that one of their entities is involved where the OFHEO/SEC would have venue. </p>

<p>USDOE is so co-opted by these companies that any serious investigative activity is unlikely. Usually the ethical regulators at USDOE have to resign or retire before they can comment on the whole situation. And so the information we lowly mortals can get about the situation is often too late or is simply more disinformation brought by those bought by the lobbyists. </p>

<p>For example default rates have been assessed at artificially low percentages, by various tricks including not tracking past 2 years or by considering deferments a form of default conciliation. But there has been some interest in revising the default data to indicate true rates. If this is done there is an expectation that actual default rates will increase considerably. </p>

<p>"An analysis of default rates by the Department of Education found that a longer-term snapshot could show that default rates are as much as 60 percent higher than with the two-year window. Under the proposed change, public schools would see their average default rate go from 4.7 percent to 7.2 percent, while private schools would edge up to 4.7 percent from 3.0 percent.
The biggest increase, however, would be at for-profit institutions, which would see their average default rate increase from 8.6 percent to an estimated 16.7 percent. Even more troubling, though, is the fact that were the cohort window extended to four years, for-profit colleges would have an average default rate of 23.3 percent. In other words, after four years, one out of every four for-profit students would likely have defaulted on their federal student loans. (Miller 2008) </p>

<p>In 2002, the Department’s IG raised a giant red flag. Sallie Mae’s relationship with USA Funds, the IG’s office wrote, presents “a conflict of interest” that needs to be cured. Because Sallie Mae effectively controls the guarantor, the IG pointed out, there is no independent agency ensuring that the loan giant is doing all it can to ensure borrowers don’t fall behind on their payments. By working hand-in-hand, the two entities actually have a perverse incentive to let borrowers fall behind so that the USA Funds can collect the generous subsidies the government provides guarantors for keeping delinquent borrowers out of default. (2008 Higher Ed Watch, Basken, Burd) " </p>

<p>The whole situation is morally sick, insofar as the influence peddlers had initially peddled fraudulently high default rates when that wasn’t the case in order to get the regulations bent in their favor. Now potential defaults are climbing because of economic strains (including abuses by the edudebt industry) they want that information constrained because it illuminates too many shady business practices on their part.</p>

<p>For those who graduated in the 80’s. 90’s and those who will graduate in the 00’s the whole situation with student loans is economically disasterous. And with the layers and layers of shell games its impossible for the average student borrower to know why they probably will never be able to pay for their education. And if the actual numbers on both the incredible profits and the shear number of people adversely affected were released, methinks there’d be a hue and cry for reform that no lobbyist would be able to quell. </p>

<p>The irony of it all is the profiteers are about the wreck their own party. And as a result of their intrusion into older more equitable systems higher education has become itself a means of lowering status rather than raising ones condition. And the result its a weird dichotomy within academia. Many profs are now little more than educated sharecroppers for the edudebt industry. But part of their jobs persona is to make students believe that education will elevate them? In my case I have a terminal degree, which was a massive economic mistake, but that is what permits me to be an academic. But increasingly I advise students in my field not to obtain terminal degrees…</p>

<p>It seems the ‘life of the mind’ is going suffocate in corporate cash boxes…</p>

<p>So yeah SMC and other companies are over levered but the amount of damage they’ve caused by their games could further wreck a shaky economy and other consequences could last for generations.</p>

33

<p>To BCEagle: Thank you for your comments, compliment, and suggestion.</p>

<p>Ron Paul and Barney Frank are known to be outspoken. Perhaps the CNBC anchors’ amazement was in response to Bunning being the source of the challenging statement. On the other hand, the anchors sounded as though they were reacting to the actual wording of Bunning’s statement, and the context in which he made his statement. (I think C-SPAN covered the hearing also, so they might replay it, and I’ll have a chance for a second look and listen at the exchange between Bunning and Paulson.)</p>

<p>Yes, I’m purposeful, but fortunately, that’s a quality I must have possessed at birth. (If I hadn’t had that quality before entering college, I wouldn’t have survived long enough to battle my way out of my hometown and into college.) College and grad school were undeniably valuable in helping me develop and improve my writing and research skills. I don’t regret the time, effort, and money I spent to earn my college degree. (I have only my bachelor’s degree; two major surgery-related financial setbacks required me to leave my graduate degree program in ABT status.) However, I do regret that despite my degree, I have never earned enough money to provide myself and my family with a higher standard of living. (My daughter’s undergraduate student loan burden will be considerably larger than mine.)</p>

<p>Letters to legislators might be in order. I’m not the activist type, but I’ll think about it. Thank you for the suggestion. </p>

<p>To mam1959: Thank you for your post and for your information. I don’t know what you mean by “overleveraged,” but I will find out.</p>

<p>To Atana: Thank you for another informative post. I appreciate it. </p>

<p>I agree that many of today’s college students have little idea what life will be like for them when their massive student loans come due. Fortunately, my daughter has always been a realistic, eye-on-the-bottom-line sort of person. She had no problem rejecting the schools which admit-denied her. (Two of those schools–both OOS public flagships–offered financial “aid” packages consisting entirely of loans totaling $26,000 to $32,000 a year!) She also had no problem rejecting two somewhat more affordable in-state public universities which espoused a “Change your major as often as you want, and stay here as long as you like (as long as you keep paying through the nose)” philosophy of undergraduate education. My daughter is pleased with the large, urban OOS state-related public university she has chosen to attend. She has made the wisest academic choice and the wisest financial choice. My daughter knows that undergraduate and graduate degrees alone will not “elevate” her, that there is no high-income “dream job” waiting for her, and that borrowing federal student loans is serious business. Within the past few days, however, she has learned how a downturn in the economy can negatively impact individuals like herself. She’s taking this news in stride, but still, she’s shocked… now. Less realistic college-bound students will be very shocked later.</p>

34

<p>Looks like Canada is doing something about the student loan problem:</p>

<p>Kitchener-Waterloo — If you have a large student loan debt that is more than seven years old, you can now have it forgiven by a bankruptcy, according to personal insolvency professionals at PricewaterhouseCoopers (PwC).</p>

<p>Under amended Canadian federal bankruptcy laws which came into effect on July 7, 2008, if your student loans are older than seven years, they can now be forgiven or compromised by filing a bankruptcy or consumer proposal with a licensed trustee in bankruptcy. As well, there are changes to the law which may see your student loans forgiven after five years if you are experiencing significant financial hardship.</p>

<p>“The change to the law will help those who have been struggling for years with unmanageable student loan debt to get a fresh start” said Wesley Cowan a Kitchener-Waterloo-based bankruptcy trustee at PwC.</p>

<p>[Exchange</a> Morning Post](<a href=“http://www.exchangemagazine.com/morningpost/2008/week29/Monday/071407.html]Exchange”>http://www.exchangemagazine.com/morningpost/2008/week29/Monday/071407.html)</p>

<p>An article on Massachusetts and grants:</p>

<p>Yet many educators are less optimistic. Two decades ago, a typical state grant covered 80 percent of college costs; now it covers 15 percent. And state and community colleges, which educate a disproportionate number of low-income and minority students, have little money to spend on financial aid.</p>

<p>[State</a> lags on student grants - The Boston Globe](<a href=“http://www.boston.com/news/education/higher/articles/2008/07/13/state_lags_on_student_grants/?page=2]State”>http://www.boston.com/news/education/higher/articles/2008/07/13/state_lags_on_student_grants/?page=2)</p>

<p>And in my frugal Yankee state:</p>

<p>Student debt in N.H. 2nd in nation</p>

<p>CONCORD — New Hampshire student loan borrowers have the second highest debt burden in the country. Eighty-two percent of the 1,500 borrowers surveyed said that without student loans, attending college would not have been possible, according to survey results recently released by the New Hampshire Higher Education Assistance Foundation Network Organizations.</p>

<p>[Student</a> debt in N.H. 2nd in nation](<a href=“http://www.seacoastonline.com/apps/pbcs.dll/article?AID=/20080715/BIZ/807150374&sfad=1]Student”>http://www.seacoastonline.com/apps/pbcs.dll/article?AID=/20080715/BIZ/807150374&sfad=1)</p>

<p>The NHHEAF said recent survey results support the need for its program designed to educate student loan borrowers about the serious consequences of defaulting on a loan.</p>

<p>There are some interesting results of a survey that they did on those in the state with student loans. One interesting national statistic was that about 56% of students used loans to fund college. The surprising part of the statistic was that 44% don’t use loans which to me is pretty remarkable.</p>

<p><a href=“http://www.nhheaf.org/pdfs/Borrowingforabrighterfuture.pdf[/url]”>http://www.nhheaf.org/pdfs/Borrowingforabrighterfuture.pdf&lt;/a&gt;&lt;/p&gt;

35

<p>Interesting that Canada acted on the matter. But not surprising given the situation here in the US. Hopefully the Canadians action might indirectly pressure our seemingly deaf, dumb and blind representatives to act to resolve a situation which is close to a public crises. </p>

<p>However Canada has been dealing with the secondary effects of the US student loan mess for some time. For several years Canadian teaching postings had a disproportionate number of US applicants. To the extent that the last time I checked (when I was still in the North), the Canadians were placing citizenship preferences on such positions. And quite a few people along that border were considering immigration to Canada as a solution to the pressures of the loan cabal. Perhaps that’s why Montana actually floated a proposal to deny drivers licenses to those who were behind on student loans. Perhaps they figured out an incipient exodus was in the making… but I wonder how many US people might now consider Canada as a option because of their new laws. </p>

<p>And state and CC’s have had problems with reductions in grants, and attendant problems in becoming reliant on loan money for funding. To the extent that many of the activities cited as problematic by the NYS SAG are still very much in evidence. </p>

<p>Timecruncher; Good your daughter is keeping a realistic view of the situation. But somehow we lose much of the moral credibility of academia by having had to come to these realizations.</p>

36

<p>To BCEagle91 (I read the materials for which you provided links) and Atana: Thank you for your most recent posts. My household is a week away from moving (two thirds of our stuff is already packed, out the door, and in storage), and yesterday was another major packing day. I had time to read your posts yesterday morning, but I haven’t had a chance to respond until now. </p>

<p>Canada’s bankruptcy law change with regard to federal student loans doesn’t sit well with me. I don’t see how a federal student loan program can continue functioning for current and future student borrowers unless graduate debtors repay their loans in full. So, I think Canada’s new policy is a bad idea. I hold this opinion because many members my generation of state and federal student loan borrowers did not take their repayment obligations seriously; they either voluntarily dropped in and out of the workforce or overspent themselves into financial oblivion, allowed themselves to default on their student loans, and then used bankruptcy as a quick and easy (and dirty) way of discharging their student loan debt. In my initial post, I stated that “there’s plenty of blame to go around” for America’s current financial mess, and I think my own generation’s defaulting state/federal student loan debtors own some of that blame. </p>

<p>I consider government student loan default to be as serious a matter as tax evasion, and I think that just as back taxes must be paid, government student loans must be repaid. I disapprove of automatically letting government student loan debtors off the repayment hook just because a certain period of time has elapsed; however, I also disapprove of imposing inflexible repayment terms and draconian penalties upon debtors who make a good-faith effort to repay, but find it temporarily difficult–or impossible–to do so. I approve of discharging government student loan debt only for those graduates who die (obviously), or who become permanently disabled, and therefore, unemployable. I somewhat approve of partial student loan forgiveness for debtors who enter government service. However, I think that all other government student loan debtors must repay somehow, some way, no matter how long it takes.</p>

<p>While continuing to research Sallie Mae, I ran across an old (September 11, 1988) New York Times article entitled, “Administration Faults Dukakis on College Loans.” That article described the Reagan administration’s negative response to Michael Dukakis’ proposed student loan repayment plan (called STARS–the Student Tuition and Repayment System), under which the federal government would administer a payroll-deduction system which would enable debtors to repay their student loans during the course of their working lifetime, rather than within a fixed number of years during which recent graduates’ earnings are most likely to be low. That article caught my eye, because some elements (but not all elements–I would make participation by state/federal student loan debtors mandatory, and I would set the payroll deduction at 5% of gross earnings) of Dukakis’ proposed plan make sense to me. It’s unfortunate that it was Dukakis who proposed this plan during the thick of the 1988 presidential race; I wonder if the same or a similar plan–either proposed by someone else or proposed at some other time–would have been better received, and perhaps be in place today. I’m trying to find out if a Dukakis-style loan repayment plan has ever been re-proposed by any member of any political party.</p>

<p>I can’t assess the “moral” credibility of academia, but I strongly agree that my daughter’s generation of college-bound students is being sold down the financial river by high schools which trumpet that all students have a “right” to a college education (and that all students can “afford” an expensive college education), and by colleges which aggressively and slickly market themselves to students. The NHHEAF report (to which BCEagle91 provided a link) is not only factual, but also insightful, and in my opinion, is a disturbingly revealing portrait of how today’s college students can easily get in over their financial heads. I think that academia is dropping the ball at the high school level, not the college level. My daughter and I attended a number of college admissions and financial aid seminars conducted by her two high schools over the past four years. Those seminars were always pie-in-the-sky positive; the issue of student loan debt was never mentioned, let alone explained. My daughter’s awareness of the risks and responsibilities of student loan debt comes from me, and in this respect, my age and my experience as someone who has borrowed and repaid student loans, works to her advantage. I am old enough to have had many years of personal contact with my grandparents, who survived the Great Depression, and who developed a lifelong fear and loathing of debt. My parents, who enjoyed post-WWII economic prosperity, didn’t listen to their parents’ warnings to avoid debt, but I listened and learned. I passed my grandparents’ wisdom on to my daughter, who–like the strong and wise great-grandparents she was never privileged to meet–has adopted their (and my) “Use it up, wear it out, make it do, or do without” approach to living within one’s financial means. No matter what happens with the economy (either now or in the future) I’m certain that my daughter will make her best effort to survive financially. My concern (and hers, as well–she’s aware enough to be concerned) is that the country’s economic problems will get so bad that even her best effort to survive won’t be good enough, and that she will fall through the financial cracks along with those who are either less aware of or less concerned about various forms of debt.</p>

<p>I didn’t start this thread with the intention of yakking about myself and about my daughter, or with the intention of spouting my own opinions and viewpoints. I started this thread to obtain information and clarification about the current financial situation. However, it’s hard for me to make sense of what’s going on unless I can acquire an understanding how current financial events relate to me and mine.</p>

<p>I thank everyone who has contributed to this thread so far, and I hope to see additional replies.</p>

37

<p>“Canada’s bankruptcy law change with regard to federal student loans
doesn’t sit well with me. I don’t see how a federal student loan
program can continue functioning for current and future student
borrowers unless graduate debtors repay their loans in full. So, I
think Canada’s new policy is a bad idea. I hold this opinion because
many members my generation of state and federal student loan borrowers
did not take their repayment obligations seriously; they either
voluntarily dropped in and out of the workforce or overspent
themselves into financial oblivion, allowed themselves to default on
their student loans, and then used bankruptcy as a quick and easy (and
dirty) way of discharging their student loan debt. In my initial post,
I stated that “there’s plenty of blame to go around” for America’s
current financial mess, and I think my own generation’s defaulting
state/federal student loan debtors own some of that blame.”</p>

<p>New American Standard Bible (©1995)
“At the end of every seven years you shall grant a remission of debts.”</p>

<p>Bankruptcy is not something to be taken lightly, especially if you
have any assets. It basically puts you in credit jail for a while.
But if a debtor has the ability to claim bankruptcy on debts, then it
naturally encourages the lender to be more cautious about the loans
that they make IF THE LOANS AREN’T SECURITIZED with the responsibility
dumped on bondholders or the government. We used to make mortgages
with the local bank in a face-to-face transaction with the bank
holding the paper. Hopefully the loan officer knows the borrower and
sees her from time to time.</p>

<p>Universities take a chance on students all the time. Their loan is far
more generous. In some cases the required repayment is $0 provided the
student maintains the requirements of the scholarship. If the student
doesn’t maintain requirements then he would be considered a “bad
investment” (to coin a term from another thread) with scholarships
rescinded. Here too the university is taking a gamble on a student as
would a lender.</p>

<p>“I consider government student loan default to be as serious a matter
as tax evasion, and I think that just as back taxes must be paid,
government student loans must be repaid. I disapprove of automatically
letting government student loan debtors off the repayment hook just
because a certain period of time has elapsed; however, I also
disapprove of imposing inflexible repayment terms and draconian
penalties upon debtors who make a good-faith effort to repay, but find
it temporarily difficult–or impossible–to do so. I approve of
discharging government student loan debt only for those graduates who
die (obviously), or who become permanently disabled, and therefore,
unemployable. I somewhat approve of partial student loan forgiveness
for debtors who enter government service. However, I think that all
other government student loan debtors must repay somehow, some way, no
matter how long it takes.”</p>

<p>You can’t get blood from a stone. If you provide serious disincentives
to work, you wind up with a bunch of former students in unemployment.
If you forgive their debts, they can hopefully get meaningful
employment, grow in their jobs and pay more in taxes than the amounts
of their student loans over the rest of their earning career.</p>

<p>In essence, we loan students $120,000 for their K-12 educations and
hope to get it back in the taxes that they will pay over their
lifetimes. There are some that don’t appreciate the expense and some
that make the most of it. There are some that throw it away right in
the public’s face. Yet we continue to provide these moneie to every
child, gratis.</p>

<p>On taxes, I would guess that IRS officials have the ability to reduce
and negotiate tax liabilities. For the same reason. If you take
everything away from someone, they have no incentive to work. You get
more in the long run if they can go back to being productive members
of society.</p>

<p>“While continuing to research Sallie Mae, I ran across an old
(September 11, 1988) New York Times article entitled, “Administration
Faults Dukakis on College Loans.” That article described the Reagan
administration’s negative response to Michael Dukakis’ proposed
student loan repayment plan (called STARS–the Student Tuition and
Repayment System), under which the federal government would administer
a payroll-deduction system which would enable debtors to repay their
student loans during the course of their working lifetime, rather than
within a fixed number of years during which recent graduates’ earnings
are most likely to be low. That article caught my eye, because some
elements (but not all elements–I would make participation by
state/federal student loan debtors mandatory, and I would set the
payroll deduction at 5% of gross earnings) of Dukakis’ proposed plan
make sense to me. It’s unfortunate that it was Dukakis who proposed
this plan during the thick of the 1988 presidential race; I wonder if
the same or a similar plan–either proposed by someone else or
proposed at some other time–would have been better received, and
perhaps be in place today. I’m trying to find out if a Dukakis-style
loan repayment plan has ever been re-proposed by any member of any
political party.”</p>

<p>The term is wage garnishment I believe.</p>

<p>How well does this work for welfare mothers and their supposedly
missing fathers? Their fathers may actually be living with them but
it’s more efficient for the father to be “missing”. It seems that it
is very hard to try to modify ingrained human behaviour and it may be
more efficient to appeal to some rather base behavours like simple
greed for the betterment of society.</p>

<p>“The NHHEAF report (to which BCEagle91 provided a link) is not only
factual, but also insightful, and in my opinion, is a disturbingly
revealing portrait of how today’s college students can easily get in
over their financial heads. I think that academia is dropping the ball
at the high school level, not the college level. My daughter and I
attended a number of college admissions and financial aid seminars
conducted by her two high schools over the past four years. Those
seminars were always pie-in-the-sky positive; the issue of student
loan debt was never mentioned, let alone explained. My daughter’s
awareness of the risks and responsibilities of student loan debt comes
from me, and in this respect, my age and my experience as someone who
has borrowed and repaid student loans, works to her advantage. I am
old enough to have had many years of personal contact with my
grandparents, who survived the Great Depression, and who developed a
lifelong fear and loathing of debt. My parents, who enjoyed post-WWII
economic prosperity, didn’t listen to their parents’ warnings to avoid
debt, but I listened and learned. I passed my grandparents’ wisdom on
to my daughter, who–like the strong and wise great-grandparents she
was never privileged to meet–has adopted their (any my) “Use it up,
wear it out, make it do or do without” approach to living within one’s
financial means. No matter what happens with the economy (either now
or in the future) I’m certain that my daughter will make her best
effort to survive financially. My concern (and hers, as well–she’s
aware enough to be concerned) is that economic problems will get so
bad that even her best effort to survive won’t be good enough, and
that she will fall through the financial cracks along with those who
are either less aware of or less concerned about various forms of
debt.”</p>

<p>What you’ve discussed is similar to one explanation of k-waves or
long-term waves. The first generation hates debt because they lived
through the terrible deflationary times. They pass their hatred of
debt on to their children who understand it somewhat but don’t
personally experience managing their finances through the period.
The next generation knows little or nothing about the downside of
credit bubbles and goes hog-wild precipitating a credit crash and
then it starts all over again.</p>

<p>“I didn’t start this thread with the intention of yakking about myself
and about my daughter, or with the intention of spouting my own
opinions and viewpoints. I started this thread to obtain information
and clarification about the current financial situation. However, it’s
hard for me to make sense of what’s going on unless I can acquire an
understanding how current financial events relate to me and mine.”</p>

<p>There are lots of chatty people here.</p>

38

<p>“I hold this opinion because many members my generation of state and federal student loan borrowers did not take their repayment obligations seriously; they either voluntarily dropped in and out of the workforce or overspent themselves into financial oblivion, allowed themselves to default on their student loans, and then used bankruptcy as a quick and easy (and dirty) way of discharging their student loan debt.” </p>

<p>Timecruncher it’s difficult to comment about specific members of your generation in regards to loan issues. However in the late 70’s/early 80’s when the financial industry lobbied to have consumer protections removed from student loans, the actual default rate was actually quite low. What they did was promote a red herring about the default problems, such as the image of herds of lawyers and doctors not paying their student loans. But it had about as much real veracity as the welfare mom and Cadillac stories of the same era. </p>

<p>Ironically, and perhaps intentionally as a result of the edudebt industries successful and long term lobby campaign; actual default rates are much higher now. This is largely because the outrageous supplemental fees that our co-opted congress has allowed the edudebt corporations to levy which make it virtually impossible to pay troubled notes. In some cases these fees can approach 25%. If you check up on what SMC and USA Funds have been doing it’s abundantly evident the corporate barons want defaults because of the incredible compensatory fees and government surety money that they can collect. So it’s very different from the 70’s insofar as student borrowers have been exposed to a system which often is little more than corporate loan sharking. </p>

<p>“…article entitled, “Administration Faults Dukakis on College Loans.” That article described the Reagan administration’s negative response to Michael Dukakis’ proposed student loan repayment plan (called STARS–the Student Tuition and Repayment System), under which the federal government would administer a payroll-deduction system which would enable debtors to repay their student loans during the course of their working lifetime, rather than within a fixed number of years during which recent graduates’ earnings are most likely to be low. That article caught my eye, because some elements (but not all elements–I would make participation by state/federal student loan debtors mandatory, and I would set the payroll deduction at 5% of gross earnings) of Dukakis’ proposed plan make sense to me”</p>

<p>Dukakis’s plan is actually very close to the Australian system, wherein a certain percentage of income is sent to the government for a set number of years. At the end of that term, remaining amounts are forgiven.
The Australian system has worked fairly well, but the Aussie’s have also maintained control over their loan system. In part because they seem to have more direct loans than those administered by private and for profit corporations. And in their system the money which is owed goes back directly to the Australian government rather than being filtered through and skimmed off (or scammed off) by a corporate system. </p>

<p>“My daughter and I attended a number of college admissions and financial aid seminars conducted by her two high schools over the past four years. Those seminars were always pie-in-the-sky positive; the issue of student loan debt was never mentioned, let alone explained. My daughter’s awareness of the risks and responsibilities of student loan debt comes from me, and in this respect, my age and my experience as someone who has borrowed and repaid student loans, works to her advantage.” </p>

<p>Well, the amount of misinformation and very, very slick marketing about the blisses of student loans which infiltrates academia is appalling. And despite the NYS AG’s exposes about the matter, its still very prevalent. It’s one of the aspects of the industry which has greatly compromised academes moral standing.
Supposedly we exist to serve students and to propagate the truth. But when our halls are lined with posters and ads, and supposed seminars, which exist solely to promote the agenda of these companies…and often do so with disregard for the actual truth or consideration of the students better interests…its very difficult to keep that systemic independence and so morality. And speaking up against these unethical tricks is very difficult. It’s not unknown for faculty who do comment to be pilloried, fired, or marginalized. Obviously enterprise has the right to advertise, but the essential difference between the edudebt industry and any other entity…is that they get to lie and do so with government complicity.</p>