Sallie Mae's About-Face on Loan Subsidies -Lender's Proposal Similar to Obama's

[Pirate Smile]

Source: Washington Post

For the past two decades, every attempt to overhaul the $85-billion-a-year student loan industry by eliminating subsidies to lenders has faced insurmountable opposition from one of the most powerful institutions in the business: Sallie Mae, the world's largest student loan company.

But in a dramatic reversal, the lending behemoth now supports President Obama's efforts to kill the subsidies it has tried to protect for so long. Instead, the company has offered a proposal that calls for the government to hold on to the loans and pay private companies for originating and servicing them.

Sallie's plan is still slightly different from the one advanced by the administration, which entails the government originating loans itself. But the company's turnaround, which surprised many in the industry, could make it more likely that the administration will succeed in transforming the way that millions of students pay to attend college.

-snip-
When Obama unveiled a plan this year to eliminate the subsidies altogether, many thought that the lending giant would once again try to defeat the move. The major student loan industry groups were apoplectic about the plan because many of them -- especially the banks -- make most of their profits on student loans by holding the loans.
But Sallie Mae quietly circulated legislation last month that is not substantially different than the administration's proposal.



Read more: http://www.washingtonpost.com/wp-dyn/content/article/2009/05/10/AR2009051001768.html?wprss=rss_politics

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Wow. Obama has scared the crap out of the health care and student loan industries to the point of where they are trying to get in on the change.

Both Student Lending and Health Care Reform can get passed by Congress through Reconciliation so only 51 votes are needed.

[sandyd921]

1. It isn't just Obama they're scared of...

it's us. They know a lot of us are angry and getting angrier by the day :grr:

[JDPriestly]

3. Besides, unless Sallie Mae and the insurance companies compromise

they will be completely out. The economy has to improve so that people can pay or repay them -- otherwise they lose everything. They have to give some in order to keep any role in their businesses at all. Frankly, neither Sallie Mae nor the health insurance companies are needed. The government could directly transfer the money from the consumers to the government in both cases -- since the government is the ultimate insurer of the money no matter who moves it around. The Fed makes the money. The insurance companies just handle it and take a cut.

[sandyd921]

6. Good point about Sallie Mae

Like the insurance companies they're nothing more than middlemen taking profits for an unnecessary (and exploitative) role in the educational process.

I've more than paid the original amount of the loan I have with them and now they're still extracting their "cut". Like health care, education should be considered part of the public commons and an extractive profit-making process should not be part of it.

[Robbien]

9. Their "cut" is all profit for the insurance companies with no downside

for them. This is not a turnaround. The insurance companies get all the profit while the government (taxpayers) is left holding the loans and the carry expense.

This does not sound like a win at all.

[aquart]

2. They aren't scared nearly enough.

[Tansy_Gold]

7. Correct. They need to be scared TO DEATH.

Dead. Buried. Out of business. Gone.

[Wednesdays]

4. K&R

:kick:

[Joanne98]

5. Don't fall for it. They'll just change it back later. It needs to be put into law.

Same with the Heathcare companies. They'll change for a little while. But then later back to bidness!

[Wednesdays]

8. Kick again

:kick: