Nothing like being allowed to play all sides and guaranteed profit

Every lender tries to borrow low and lend high. The best lenders lend into no-lose situations. By this standard, either Sallie Mae is a genius, or the federal government is a sap.

I’ll take ‘sap’ for two bits, masaccio.
No one in Congress, and not many at the Ttreasury, seems to have a clue about actual business practices and how to not get taken by fast-talking con men.

can we tell for certain that “The President wants to change this and Sallie Mae and its fellow privateers are fighting to kill the House Bill with a fake compromise.”?

Or, is this as golden as his support for a Robust PO?

This is how it works everywhere. In Ontario Canada, if you get a student loan of any kind, the government guarantees repayment to the banks, at a profitable interest rate. The student, gets ripped off literally on interest. Happens everywhere.

Just because they let it happen, doesn’t mean that they are clueless about exactly what is going down.

A key element in there that Masaccio hasn’t specifically laid out here is that the hypothetical gross profit of $476.43 leaves a whole lot of $ on the table for steak dinners for congressional staff, other lobbying expenses, sinecures for ex-politicos and PAC donations.

Some financial-aid administrators at colleges around the country say they are worried that the political uncertainty over the loan proposal and the one-size-fits-all approach of the White House’s approach could hurt colleges and students.

“We’re caught in a political struggle,” Caesar Storlazzi, the chief financial aid officer at Yale, said in an interview. Like a wave of other colleges in recent months, Yale decided in November to switch from private-sector loans to the federal government’s direct-lending program.

But with passage of the White House plan now appearing “less inevitable,” Mr. Storlazzi wonders whether keeping the private lenders in business is better for students.

“It really felt like the administration was just shoving this down our throats,” he said. “It feels a bit like a federal takeover.” With competition among lenders, he said, “We get better prices and services.”

If competition is so good, why not add a PO to the health care bill?

I think that’s called legalized theft. With government deficits so high, with budgets under such fiscal and political pressure, why would a responsible legislature or executive continue to structure a vital national program in as expensive and wasteful a way possible – when an alternative, direct government lending structure already exists that could replace the pseudo-services offered by Sallie Mae and its peers? Why?

It feels like more of that “the government should keep it’s hands off my Medicare”.

“The administration was just shoving this down our throats”. “It feels a bit like a federal takeover”. Takeover of what? Federally subsidized loans?

It wasn’t too long ago that there was an expose of payoffs from loan originators/servicers to financial aid offices and officers (led by NY AG Cuomo)

Big government the playground of big business and big banking. Who would’ve thunk it?

Great post. Thanks!

More Corporate Welfare… Just like other Pork this must be ended. Why should we pay the rich to get richer on the backs of our students. No wonder the Right wants to destroy Public Schools at all levels and this has been going on for decades.. Hey they can make a fortune charging the kids and their parents $$$$$$ and then some to educate our kids… With a right leaning taint to it.
Ever y child in this country should be guaranteed education including the first four years of college. It is just like Health Care without you either die(from neglected HC) or never have a decent job paying a living wage and you do need college to do that these days and even needing incomes to scrape by..!!

Here’s an idea. Former grads who have student loans outstanding with Sallie Mae should refuse to pay their student loans. Just stop altogether in protest and make a vow not to pay them off. Much like a citizen’s strike against the lobbyists, the corporations and the corporatists who have taken over our government. The government has to pay for it anyway. This way everyone wins. Credit pretty much means nothing anyway. It’s time the students and citizens take back their lives from indentured servitude that this system condemns us too.

Here’s where the $476 comes from: the “origination fee” paid by the student.
Yep, A student loan for $10K only yields a $9000 tuition payment for the student to Private U.
(Thats $4500 per semester). The lender gets an off-the-top profit of !0% pronto.
The student? Poor smuck has to pay back $10,000. And the $500 per semester goes to wining and dining those assholes elected to congress.

Okay, wait a minute, did I read this correctly?

Sallie Mae can sell the loan to the Department of Education for $10,492.31. If the interest rates charged by the FHLB don’t change, total interest due to FHLB is $15.88. Sallie Mae repays the FHLB loan with interest, and picks up a gross profit of $476.43. The government gets the money back only when you pay the loan.

Are you saying that on a single $10,000 loan at around 5.6% for a mere six months, Sallie Mae can:

Subtract the mere $15.88 from the interest amount of $492.31, in order to make a profit of $476.43?!

Did I read this correctly?!
There are how many amounts of $10,000′s loaned daily across the US…

Even 100 loans at that amount is a profit of $4,764.30, correct?
And 1,000 loans is a profit of $47,643.00?

And… the math on this one is simple, assuming that my underlying numbers are correct.

Less than 16 bucks gets you $146.
Then multiply…

Am I nuts?
Did I misread this post?

“Fourteen percent of the population – some 30 million Americans – lacks the literacy skills to perform simple, everyday tasks like understanding newspaper articles and instruction manuals.

Twelve percent of Americans lack the literacy skills to fill in a job application or payroll form, read a map or bus schedule, or understand labels on food and drugs.

More than one in five Americans – 22 percent of the population – have “below basic” quantitative skills, making it impossible to balance a checkbook, calculate a tip, or figure out from an advertisement the amount of interest on a loan.”

- from “Access to Knowledge” (accessible at http://www.measureofamerica.org/2008-2009-report/factoids )

Debt as a barrier to education and the increasing privatization of education … WOW … that would only be allowed in a third world country … wait, the US is a third world country:

“The latest report from the Organization of Economic Cooperation and Development (OECD) ranks the United States with the highest disparity of income in the developed world. They also report the U.S. has progressively become the most unequal society of all industrialized nations. The gap between rich and poor has widened more rapidly than in most other countries over the past 20 years.”

- from “Is The U.S. Becoming a Third World Country?” (by Mary Spierling, Nov 10, 2009 ; accessible http://americanaffairs.suite101.com/article.cfm/is_the_us_becoming_a_third_world_country )

“How are you doing in the American HD Index rankings? Find out by calculating your personal American HD Index score!”

Calculate your own

“Ever wondered how your state stacks up compared with others on obesity rates, SAT scores, or number of recent army recruits? How does your congressional district fare compared to your neighbors on life expectancy, high school dropout rates, or earnings? Find out with our mapping tool, which allows you to create customized maps by state or congressional district.”

Launch an interactive map of the United States and congressional districts.

Correction: should be:

Less than 16 bucks gets you $146. $476
Then multiply…

Yep. And you pay that ‘origination fee’ on all student loans. (It was ten percent even thirty years ago, on my much smaller loans. Which have been paid back.)

Hold on Massacio, I am not sure you have painted the scenery exactly right.

It’s not so much about the 476 dollars as this:

1. Sallie gets to borrow from the Federal Home Loan Bank at 0.23%. The student does not.

2. The student may get a subsidy during the “in-school”, but Sallie gets 5.8% a year in the meantime. So the spread is (5.80 – 0.23 ) = 5.57%. We sometimes say “557 basis points”.

3. Five hundred fifty something basis points is a remarkable spread on a loan that the government will back if the student does not pay up. I think Sallie might have to take a 3% (300 basis point) hit in that rare event.

4. If Sallie is getting the money from a Government Agency, why can’t the student get the money directly from the same agency? What makes Sallie so special?

What makes them “private enterprise”, even? Because they touch the check before they send it to the student borrower?

Yep. When I got my student loans as a younger person in Canada, the bs line I was told was that the loan was at 1% over prime. It wasn’t. It was 6% over, so my loans were at 11% interest when I could have just borrowed the money directly from the bank at a lower rate if they would loan it, which they wouldn’t. Took me 10 long f’ing years to pay off those vultures!! It’s not really comforting to know that is how the game is played everywhere.

It’s not really comforting to know that is how the game is played everywhere.

Well, not everywhere. In Japan, I don’t think there is a student loan system at all. There is a test to qualify to get in to college, but I think after that the tuition is paid.

In the end, it’s just an indirect subsidy to the colleges anyway, paid by a “tax” on the student through the loan payment.

That’s why the colleges are always eerily silent whenever this issue comes up.

I’d say your reading skills are still intact.

Precisely.

I have a daughter in the final stages of nursing college. After she is done in April, she has to work, FOR FREE, until September in a job placement as part of her education. Oh and while she works FOR FREE, she also has to pay the college tuition full amount for those few months. Is democracy freedom and capitalism great or what?