Stef Gray is the young lady who is taking on student loan giant Sallie Mae Corporation (NAS: SLM). She spearheaded a petition drive to get the company’s attention about a fee that it tacks on to unemployment forbearance applications for student loans. This was something like paying on the order of $50.00, just to show your “good faith” in asking for the forbearance. The fifty went right to Sallie–not the principal balance or interest.
I don’t have any dealings with Sallie Mae, but I can’t stand it as a company, because of its negative effect on the education financing arena. They have been around as long as I have had student loans, and they’ve just basically been really bad news. When the Clinton Administration sought to push through student lending reforms, which would have made all student lending directly from the U.S. treasury, and at government-set rates, it was Sallie who was buying off Congressman to see it the Corporation’s way—rather than the American public’s way!
I particularly remember one Wall Street Journal editorial from 1997 or ’98, maybe, showing a Charles Dickens’ character. I think it was the Artful Dodger. The subtext was that any student borrower looking for a benefit from Congress was akin to some kind of thief. It’s the kind of high insult that doesn’t get forgotten, if even forgiven.
This, coming from a lobbying enterprise whose sole existence depends on Congress outsourcing a national function—higher education finance—to private enterprise. (There was, and is, no need to.)
I wish Stef Gray and the gang a lot of luck, because it’s a long haul. The real problem is that the “private student loans” created a bubble. They–the schools who received these loan proceeds–priced education higher than what it should have been priced, given a truly free market. It created a market imperfection.
The only way to get this money back, practically, is through an endowment tax. But, again, good luck. Because the same way that Sallie used its pile of money to buy Congress, the high endowment schools use their money to get their way.
Another plausible solution might be to fold private student loans into the federal guidlines, under Income Based Repayment, for paying back the government student loans. Congress has already agreed to cancel the balances at the end of the payment term in that program, and so there would have to be some sort of work-out on the private loans remaining balance at the end of the 20 years. (Frankly, I think this is where the endowment tax comes in. That, or nationalize Sallie—then, you can treat the private loans the same as federally-backed ones.)
Stef Gray’s victory on the nuisance fee is an indication that the problem of higher education finance is not going away, is not going to be ignored, and is not going to be “shamed away” a la 1997 Wall Street Journal editorials. This is the kind of stuff that has, historically, had students in other countries overturning and burning cars. Our Occupy movement people are mere pussycats compared to that.