A student loan company called Nelnet was the largest corporate contributor to the Republican Congressional Committee in the 2006 midterm elections, giving $153,000, according to a Los Angeles Times report. Sallie Mae, another student loan company, was one of the largest contributors to Rep. John Boehner, an Ohio Republican who is a strong proponent of deregulating the industry. Don't think for a second that this was done as a gesture of good will. The student loan industry has been one of the most corrupt industries, if not the worst, in the U.S.
Originally a government-sponsored company, Sallie Mae became a private company in 1997. Sallie Mae is the largest private student loan lender in the U.S. Although it's called a private company, it is still completely insured by the government to never lose any money. If someone doesn't pay his or her loans off, the government will foot the bill, no matter what. President Bush's own budget analysts have said this costs the taxpayers an estimated 12 cents on every tax dollar, and all of that taxpayer money goes directly into the pockets of private student loan companies like Sallie Mae and Nelnet. This subsidizing costs billions of dollars every year.
The student loan industry hasn't just added to the corruption in Washington; it has also hurt students all around the country. The Web site StudentLoanJustice.org has many personal accounts of how loans have affected students around the country. The most common problem is students going into default because of hardships. The student loan industry doesn't care, because it gets paid either way. If a student defaults, the government pays all principle and interest.
In a report on student loans, "60 Minutes" reporter Leslie Stahl interviewed a woman who was a student in 1985, took out a $60,000 loan and became ill her sophomore year. She has been ill since but has still paid her loan every month to keep from going into default. By the time she finishes paying off her loan, she will have paid Sallie Mae more than $260,000. That sounds like a pretty good deal on Sallie Mae's part. In the same report, a Harvard law professor named Elizabeth Warren said, "Sallie Mae makes money if you pay back on time. And Sallie Mae makes money if you don't pay back on time. It shouldn't be the case that Sallie Mae gets to play every hand at the poker table while the government is the one that keeps anteing up
the money."
Democrats have said they want to lower interest rates for students and make tuition tax-deductible. Time will only tell if this gets fixed. For the sake of all the students out there in college now and all of the college graduates who are still paying off loans, let's hope these issues can be resolved.
JD Mathews
Daily Lobo reader
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