The ClassWarfare on Education and those wishing to escape poverty!
Sallie Mae, the student loan company, completed privatization at the
very end of 2004. Then as a form of thank you to Mr. Bush for
speeding up the process gave $250,000 (money made off of indebt
students and former students) to Bushâs Inaugural party (as many
suffer from the tragedy of the tsunami in the Indian Ocean) on January
20th 2005. The day that the electoral college proclaimed Mr. Bush
winner in the 2004 presidential election Sallae Mae has began its
campaign to collect money owed by students even if that former student
is terminal and on a deathbed. This begins the new front in class
warfare that the corporate media will ignore as soldiers (who joined
the "volunteer" military to pay for school) loose veteran benefits.
Below are articles with URLs documenting this new front in the class
warfare that the Corporate run regime has begun. Please copy and
paste this in every Blog and listserve that is appropriate and/or
e-mail to friends and/or print it out and literally post it in public
places. The war on the people has just reach a deeper assault.
Sallie Mae completes privatization
Educational lender cuts ties with U.S. government
By Robert Schroeder, CBS MarketWatch
Last Update: 2:21 PM ET Dec. 29, 2004
WASHINGTON (CBS.MW) -- Educational lender SLM Corp., commonly known as
Sallie Mae, completed its makeover from a government-sponsored
enterprise into a private company Wednesday.
Reston, Va.-based Sallie Mae (SLM: news, chart, profile) owns or
manages student loans for more than 7 million borrowers, and is the
nation's premier student lender.
"We're very happy and very proud" to complete the privatization
process, Chief Executive Albert L. Lord told reporters at a signing
ceremony at the Treasury Department.
Congress chartered Sallie Mae in 1972 to create a secondary market for
student loans. Lawmakers authorized the company to begin going private
in 1996, and the company has been managed as a private entity since
1997, Lord said. Sallie Mae owes the government no money.
Sallie Mae's stock rose modestly on the news, up 17 cents to $53.67.
Lord predicted the company's loan business would not change following
Sallie's stock price will probably continue to grow by 15 percent to
20 percent per year, at least for the next five years, Lord added
after the ceremony.
Assistant Treasury Secretary Wayne Abernathy joined the executive in
signing documents severing the company from the government.
Sallie Mae completed its privatization plan almost four years ahead of
schedule, Abernathy said.
Lord also reconfirmed Sallie's pursuit of a combination with the
Pennsylvania Higher Education Assistance Agency, which the agency has
He projected optimism that the deal would go through when its merits
are considered by authorities.
"We're just getting started" negotiating with the agency, he said
Wednesday. "It's a question of who speaks for the taxpayer up there."
In a Dec. 14 letter to the organization's president, Lord proposed
that Sallie Mae assume operating control of the agency, while the
board would retain control over policy. Student benefit programs would
remain unchanged under Sallie's control, he asserted, and student
discounts and grants could be increased "very significantly."
"A Sallie Mae transaction would significantly improve the
commonwealth's higher education financial picture," Lord wrote,
referring to Pennsylvania.
Critics: Corporate donors eye inaugural party favors
By Andrew Miga
Tuesday, December 21, 2004
WASHINGTON - Two dozen wealthy corporations and businessmen each wrote
whopping six-figure checks for President Bush's inaugural - donations
that a Washington watchdog group charges are meant to win favor with
the White House.
``It's to curry favor with the Bush administration,'' said Steven
Weiss of the non-partisan Center for Responsive Politics. ``It takes a
hefty contribution to get noticed among this group of big donors.''
Among the 14 big-ticket donors who wrote $250,000 checks were
energy giants Occidental Petroleum Corp., Exxon Mobil and former Enron
president Richard Kinder, according to the latest listing yesterday on
the Presidential Inaugural Committee's Web site. Major donors will be
granted special access to many of the Jan. 20 inaugural balls and
other VIP events. Inaugural officials stress they publicly disclose
large donations to avoid any suspicions of special influence for
``The president believes in full transparency and full
disclosure,'' said committee spokeswoman Tracey Schmitt, who noted
such contributions help many Americans who otherwise could not afford
it to attend inaugural festivities.
The roster of $250,000 donors also includes Dell computer founder
Michael S. Dell, Texas financier T. Boone Pickens, the giant education
loan company, Sallie Mae; and United Technologies, a Pentagon
contractor that makes Black Hawk helicopters for the military. Another
defense firm, Northrop Grumman Corp., gave $100,000. A nuclear
industry trade group, the Nuclear Energy Institute, also wrote a
$100,000 check. In all, 26 donors have given more than $4.5 million
for the inaugural, which is expected to cost upward of $40 million.
Energy Firms Lavish Funds on Inauguration
Energy Companies Step Up With Major Donations for President Bush's
The Associated Press
WASHINGTON Dec 18, 2004 â" More than $4.5 million from the corporate
world has flowed to President Bush's inauguration fund, much of it
from the energy industry and some of its executives in contributions
of $250,000 each.
Outside the energy sector, New Orleans Saints football team owner Tom
Benson gave $50,000 and his companies gave $200,000, the fund reported
Northrop Grumman Corp., the world's largest shipbuilder and
second-largest U.S. defense contractor, donated $100,000.
Michael Dell, chairman of Dell Inc., the world's largest personal
computer maker, gave $250,000. So did United Technologies, maker
products ranging from escalators to aircraft engines.
Investment banking firm Stephens Group Inc. of Little Rock, Ark., gave
$250,000. And the education loan firm Sallie Mae gave $250,000.
Occidental Petroleum Corp., whose business stands to benefit from the
president's actions concerning Libya, donated $250,000, as did Exxon
Mobil, the world's largest publicly traded oil company. Exxon Mobil
reported record third-quarter profits, thanks to higher prices for oil
and natural gas.
In April, Bush took steps to restore normal trade and investment ties
with Libya, enabling four American oil companies, including
Occidental, to resume commercial activities there after an 18-year
Bush's action was a reward to Moammar Gadhafi for eliminating his most
destructive weapons programs.
Other donors from the energy sector included Texas oilman T. Boone
Pickens, who gave $250,000; and former Enron President Richard Kinder,
who left the firm five years before it collapsed and now is CEO of one
of the largest energy transportation and storage companies in the
country. Kinder also gave $250,000.
Energy provider Southern Co., which owns utility companies in Alabama,
Florida, Georgia and Mississippi, gave $250,000.
The Nuclear Energy Institute, the policy organization of the nuclear
industry, gave $100,000.
On the Web:
Copyright 2005 The Associated Press. All rights reserved. This
material may not be published, broadcast, rewritten, or redistributed.
Jan. 6, 2005
U.S. gets tough on failure to repay student loans
The Associated Press
ROLAND, Okla. - The bill collector called when Clay Stanley, gaunt and
suffering from AIDS, lay bedridden in his apartment, back from the
hospital after a bout with a viral infection.
It wasn't about a car or credit card. The call concerned a matter Mr.
Stanley, who is 39 years old, says he had long forgotten: student
loans he took out two decades before. The private collector, acting on
behalf of the U.S. Department of Education, said Mr. Stanley must pay
$69 a month or the government would take a larger sum than that each
month from his Social Security disability checks, Mr. Stanley recalls.
"I didn't know what to do, so I said 'OK,' " he says.
Years after a political outcry over high levels of student-loan
defaults, the Education Department has become one of the toughest debt
collectors around. Over the past decade, it has won a steadily
expanding arsenal to wield against former students who don't repay.
A 1998 change in federal law, for instance, made it extremely
difficult for people to escape student loans through personal
bankruptcy. The Education Department also can now seize parts of
borrowers' paychecks, tax refunds and Social Security payments without
a court order, a power that only the Internal Revenue Service, among
federal agencies, regularly wields. Access to a government database of
the newly employed has enabled the department to make much more
effective use of private collection companies. And it can go after
even decades-old student loans, because there's no statute of
limitations on them, unlike most consumer debt.
As a result, the Education Department collected $5.7 billion in
defaulted student loans in the fiscal year ended Sept. 30, more than
twice as much as in 1998. For current loans that go into default, the
department now projects it will ultimately retrieve every dollar of
principal, plus almost 20 percent in fees and overdue interest, a
prediction few private lenders would be bold enough to make.
The aggressive approach has sparked an outcry from some borrowers,
consumer-advocacy lawyers and even some bankruptcy-court judges. They
complain that the department runs roughshod over some former students
who've suffered reversals of fortune. "Student-loan debt collectors
have power that would make a mobster envious," says Elizabeth Warren,
a Harvard Law School professor and bankruptcy specialist.
Some who favor a softer stance argue that student loans are a form of
financial aid â" not quite the same as other consumer credit. They also
note that the borrowers have, after all, been encouraged by the
federal program to go into debt to attend college. And they say
students are usually financially unsophisticated borrowers, lacking an
understanding of how debts can pile up because of unpaid interest. So
shouldn't they get more slack, the critics ask, than, say, credit-card
The Education Department responds that taxpayers, legislators and the
many students who do repay their loans all expect it to pursue those
who don't. It says the federal government, the state agencies that
administer the program and the private lenders that primarily make the
federally guaranteed loans all work with past-due borrowers. They
offer counseling and a chance to refinance at today's low interest
rates, says Terri Shaw, the Education Department's chief operating
officer for student aid, who adds that there are plans that link the
size of payments to incomes. "We're here to help," Ms. Shaw says.
The government's toughness traces back to the 1980s, when politicians
became alarmed by high levels of student-loan defaults. Some waged a
campaign against deadbeat doctors, lawyers and other professionals
taking advantage of the government.
Today the default rate on recently made loans has dropped. It was 5.2
percent last year, down from 22 percent in 1990. And professionals
such as doctors and lawyers are far from the worst offenders.
Graduates of four-year or graduate programs at private universities
default at a 3.1 percent rate, while students of trade schools and
community colleges default at almost twice the 5.2 percent overall
rate, according to Education Department data. Studies show that those
most likely not to repay are students who, like Mr. Stanley, didn't
complete their studies.
In the 1980s, Mr. Stanley took out a $3,700 student loan to attend
Garland County Community College in Hot Springs, Ark., then
transferred to Henderson State University in Arkadelphia. He never
graduated, figuring he needed to take a job to support himself. He
worked as a clerk in a hospital, a toy-store manager, a bartender and
a blackjack dealer, never earning more than $7 an hour.
After Mr. Stanley learned 10 years ago he had the AIDS virus, he
started living on disability checks from Social Security. Standing 6
feet 2 inches, he now weighs just 106 pounds and needs a rubber band
to keep a ring from sliding off his thinned ring finger. He doesn't
have a job and takes 16 pills a day to stay alive. To help make ends
meet, he has a roommate in his apartment in Roland, Okla., near the
Mr. Stanley says he hadn't heard anything about his student loan in
six or seven years when he got a call in late 2003 from Pioneer Credit
Recovery Inc. Pioneer is a unit of student-loan giant SLM Corp.,
commonly called Sallie Mae, and has a contract to collect for the
Education Department. Mr. Stanley learned that unpaid interest and
penalties had nearly doubled his balance to $7,000.
He was getting $696 a month in Social Security disability payments. He
says a Pioneer agent challenged the $225 a month he was paying on his
1999 Pontiac Grand Am, which he uses to drive to a clinic in Tulsa,
Okla. "I told him you can take my car if you'll drive me to my
doctor's appointments," Mr. Stanley says.
He says the agent told him he needed to start paying $69 a month, or
the government could withdraw $189 from each monthly disability check.
Mr. Stanley says he agreed to pay $69 a month for six months. He
supplied his bank-account number and the withdrawals began.
A spokesman for Pioneer's parent, Sallie Mae, says privacy laws don't
permit discussing details of clients, but "we followed all appropriate
laws, regulations and procedures in working with and counseling the
borrower." Sallie Mae â" once federally chartered but now separate from
the government â" buys and repackages loans for sale in the secondary
market. It also now originates and services student loans, and its
Pioneer unit collects under contract with the Education Department.
Like all the student loans, the ones Sallie Mae makes are guaranteed
by the federal government.
The Sallie Mae spokesman, Tom Joyce, notes that the government will
cancel a student loan only if a doctor signs a form saying the
borrower is "totally and permanently disabled." Mr. Stanley says his
doctor wouldn't. Without such a signed form, Mr. Joyce says, Sallie
Mae's collection unit offers options "to get the loan back on track,"
and "if that fails, we have no choice but to refer the case" to a
state guarantee agency or to the Education Department.
Mr. Stanley says he got a letter this week saying the Education
Department had directed the Treasury Department to make automatic
deductions toward his delinquent loan from his Social Security
disability check, which now is up to $785 a month. The letter didn't
say how much the deductions, to begin in March or later, will be. He
says the letter did say that the government was permitted to take up
to 15 percent of his check, provided the monthly benefit didn't fall
Federally guaranteed student loans began with President Johnson's
"Great Society" campaign. Now two-thirds of students at private
four-year colleges have them, averaging $17,000 at graduation, says
the American Council on Education, which represents college and
university presidents. Students who go on to private law, medical or
other professional schools end up owing an average of almost $74,000.
The Education Department opened the program to higher-income families
in 1992. Loans outstanding have tripled over the past decade to $357
Though the U.S. government makes some of the loans directly, most are
made by private lenders such as banks, with the government
guaranteeing payment. The guarantees plus federal interest-rate
subsidies let lenders offer low rates despite students' scant credit
history. The rate on new student loans, set annually and tied to
Treasury bills, is now 3.37 percent. Repayment generally begins six
months after graduation. The repayment term is usually 10 years, but
borrowers can choose a longer one.
If no payments are made for 270 days, loans are in default. Then state
agencies â" which both administer the loans and offer lenders an
initial guarantee â" will try to collect. If they can't, they will kick
the loans back to the Education Department. The department has a
stable of collection firms it uses. Under federal law, the collectors
are entitled to 20 percent of what they recover. Those fees are added
to borrowers' loan balances.
Four years ago, the collectors started using a national directory of
the newly employed compiled from employers' filings with state
employment divisions. That has helped in tracking down defaulted
student-loan debt, which now totals $30 billion.
In 1998, largely unnoticed, the federal law governing the loans was
changed so borrowers could shed them in bankruptcy only by proving it
was an "undue hardship" to repay. Student loans thus joined a rarified
class of obligations, such as child support and restitution in
criminal cases, that can almost never be shirked. It is a very hard
test to meet, as cases such as Carol Ann Race's show.
In the 1980s, Ms. Race borrowed $20,000 to study theology and
philosophy at the University of St. Thomas in St. Paul, Minn., and
another school. Now 42, she has five children, ages 4 through 11. Two
Her husband earns $18,000 a year as a nursing-home aide. The family of
seven lives in Bertha, Minn., on $28,000 a year, including government
disability payments to the autistic children. Ms. Race says she made
$300 monthly payments on her student loan for 2 1/2 years before she
lost her job as a religious educator in a church in 1994.
She filed for bankruptcy in hopes of getting the loans â" the family's
only debt â" canceled. A year ago, U.S. Bankruptcy Court Judge Dennis
O'Brien ruled against her. In an interview, the judge says he wanted
to let her out of the loans but was sure he would be reversed on
appeal. His opinion said that because of higher-court rulings, he
couldn't cancel her student loans unless he found that repayment would
"strip Race or her family of all that makes life worth living."
At the end of her case, Ms. Race owed $34,000 at 7 percent interest.
Pursued by two state agencies that made the initial guarantee on her
loans, she has signed up for a repayment program with a 5.125 percent
rate; the payments will be linked to family income. She says she will
be paying the debt for decades, making it difficult to set aside money
to care for her children.
"I always felt if I could get a judge to listen to me, it would be
simply gone â" they would forgive the loan," Ms. Race says. "Anybody
who has any heart at all could see that our circumstances weren't
brought about by our actions or our foolishness."
Over the years, some bankruptcy judges have opposed the rule
tightening. Bankruptcy Court Judge A. Jay Cristol, who presides in
southern Florida, sees the policy as "way too harsh." The Education
Department's Ms. Shaw says the government should make it tough to get
out of student loans because taxpayers have already given the
borrowers a valuable asset, an education, and it isn't collateral that
can be repossessed.
In the mid-1990s, a federal commission taking a broad look at the
bankruptcy code said education-loan abuses cited by lawmakers were
infrequent, "more perception than reality." The panel, mainly lawyers
specializing in bankruptcy and related fields, recommended treating
student loans like other consumer debts in bankruptcy.
But not long after, in 1998, Congress tightened the bankruptcy
treatment of student loans. The change resulted from wrangling over an
education bill, says Henry Sommer, editor in chief of Collier on
Bankruptcy, a legal reference work. The Clinton administration was
seeking a reduction in student-loan interest rates, a move lenders
opposed. The administration agreed to provide a subsidy to cushion the
rate cut for them. At the same time, the government changed the
treatment of student loans in bankruptcy, which would mean smaller
losses for the Education Department and taxpayers.
That leaves borrowers like Jonathan Gerhardt, 46, little choice but to
pay. He is a cellist. The child of two classical musicians in
Columbus, Ohio, he studied at the New England Conservatory of Music,
performed with two city orchestras and finally won a spot as principal
cellist at the Louisiana Philharmonic Orchestra in New Orleans.
Despite climbing this high in his field, he was earning just $20,000 a
year three years ago, including pay for teaching cello at Tulane
University. He buckled under his $100,000 in student loans and filed
Lawyers for the Education Department and a guarantee agency that held
some of the loans sought to make him pay. The opinion of a bankruptcy
court in New Orleans says the lawyers told the court Mr. Gerhardt
could trim his expenses, such as $23.90 a month for Internet access
and $48.51 for a gym membership. They also suggested he get rid of his
cat to save $20 a month.
Bankruptcy Judge Jerry A. Brown, however, said Mr. Gerhardt had to
work out to relieve back pain from playing the cello, and needed the
Internet to look for extra work. "Expenses related to his cat are not
luxuries, considering he is single and lives alone," the judge wrote.
He ruled that repaying the loan would be an "undue hardship" and
The Education Department appealed. A federal appellate court sided
with the government. It suggested Mr. Gerhardt find a job as a
Mr. Gerhardt says he is already working 60 hours a week, including
rehearsals for the Louisiana Philharmonic, practicing and teaching. He
recently moved into an apartment with a roommate, saving $50 a month
on rent. He says he stopped taking annual trips to Ohio to visit his
81-year-old mother, and doesn't believe he will ever be able to
support a family or afford a house. Mr. Gerhardt says he is now paying
$200 a month toward his loan. The government wants $900.
"I wish I had known it would be like this," he says. "I would have
gone to a less-expensive graduate school. I will be paying for this
for the rest of my life."
Rendell finds Sallie Mae's $1 billion bid for PHEAA 'intriguing'
The nation's largest student lender, Sallie Mae, has offered $1
billion to take over the Pennsylvania Higher Education Assistance
Agency, a government office long known for its cut-rate college loans.
Higher education officials wonder how Sallie Mae can match PHEAA's
lack of fees and favorable repayment terms, and agency officials said
a takeover by Sallie Mae would hurt students.
"The bottom line is they make money from students and families," said
Keith New, a PHEAA spokesman. "Therefore, its long-term success
requires bigger profits from students struggling to pay for their
Founded in 1964, PHEAA manages $45 billion in loans and state
education funds. This includes $3.1 billion in federal Stafford and
KeystonePLUS loans made last year for 428,000 students and parents,
and $356 million in state grants for 150,000 students.
Pennsylvania students who get KeystoneBEST -- the state equivalent of
the federal loans -- pay no fees. The fees on Stafford loans range
from 1 to 4 percent of the loan amount at other lenders. Parents who
get KeystonePLUS loans pay 3 percent rather than the standard 4
In addition, students who have graduated or enter repayment with most
kinds of PHEAA loans get an immediate 0.25 percent reduction when they
sign up for automatic payments from their bank account. If they make
48 consecutive on-time payments, the remainder of the loan is reduced
by 2 percent.
Parents paying off PLUS loans get a 1 percent rebate after the first
24 consecutive on-time payments and an additional 1 percent rebate
after 48 consecutive on-time payments.
Under its proposal, Sallie Mae would pay $500 million up front and
$100 million annually over five years to manage PHEAA's $45 billion in
outstanding loans and service them, a spokesman said Tuesday. Given
its size -- nearly $100 billion in loans out -- the corporation said
it could do the job more efficiently than the state and keep offering
affordable college loans.
Gov. Ed Rendell, who received the unsolicited offer Monday, finds
Sallie Mae's bid "intriguing" and has experts reviewing it, said
spokeswoman Kate Philips.
But college-bound students and their families fret they might find
school loans more expensive, if Pennsylvania's student-loan business
gets contracted out to the giant corporation.
"PHEAA loans are very competitive," said Megan Balsley, 22, who
graduated in April from the University of Pittsburgh with a bachelor's
degree in marketing. In August, she consolidated four student loans
into a single $17,000 loan through PHEAA that charges an interest rate
of 2.85 percent.
"I have a friend who is paying off his loan at 9 percent," said
Balsley, of Pittsburgh's Morningside section. "So getting something
under 3 percent was definitely a good thing. I would be concerned if
they were to go up."
Formerly named SLM Corp., Sallie Mae was founded in 1973 as the
Student Loan Marketing Association. Based in Reston, Va., the
corporation has more than $98.5 billion in loans outstanding to more
than 7 million borrowers.
"Sallie Mae is one of the largest and most aggressive for-profit
companies in the world," PHEAA said yesterday in a statement to
Pennsylvania's colleges and universities after Sallie Mae's offer
became public. "They are publicly traded on the New York Stock
Exchange, have transferred American jobs overseas and market credit
cards, cell phones and home mortgages directly to students.
"As a nonunion shareholder-driven corporation, they are compelled to
continually increase profits at the expense of students and families."
Higher education officials and consumer groups also wondered about the
potential impact of Sallie Mae's proposal.
"If you have a student loan marketplace with less competition, you'll
probably have students getting fewer options and less deals as a
result," said Kate Rube, higher education advocate for the Washington,
D.C., office of the Pennsylvania Public Interest Research Group, a
"Sallie Mae is definitely a company that pushes for policies that harm
student borrowers," Rube said. She cited the company's interest in
preventing students from consolidating their loans and locking in
Sallie Mae has gobbled up smaller college funders before. In 1999, it
acquired the New England Loan Marketing Association -- or Nellie Mae.
It wrote $375 million in college loans the year before that, an amount
that should grow to $1.5 billion this year, said Joyce.
"PHEAA would be a big one, obviously," said Matthew Snowling, an
analyst who follows Sallie Mae for Friedman Billings Ramsey, a
brokerage firm in Arlington, Va.
"This would enable Sallie Mae to get a toehold in Pennsylvania," he
said. Sallie Mae has only a modest share of the Pennsylvania
college-loan market, which is dominated by PHEAA. And he worries
Sallie Mae would use new-found muscle here to exploit borrowers.
"A student's 3 percent loan through PHEAA is exactly what you'd get
from Sallie Mae or anywhere else," said the analyst. The rate is set
by the federal government on such lenders if they want to sell their
loans to Wall Street. Doing so keeps more money flowing to borrowers.
Sallie Mae would retain the state agency's roughly 2,100 workers, said
spokesman Tom Joyce. The corporation currently employs 800 loan
administrators in Wilkes-Barre.
"Our proposal would keep in place all of PHEAA's grants,
loan-forgiveness and philanthropic programs," Joyce said.
"Sallie Mae asserts they can save the taxpayers tens of millions of
dollars on the (loan) servicing side, which is intriguing to the
governor because he's always looking at ways to save the taxpayer
(money)," Philips said.
It is premature to say whether Rendell would endorse the outsourcing
and present it to state legislators for approval, she said.
"The money we're talking about could provide additional,
higher-education funding for thousands of Pennsylvania families,
particularly at a time when the state budget is being cut," Joyce said.
Thomas Olson and Bill Zlatos can be reached at tolson@...
PHEAA (Pennsylvania Higher Education Assistance Agency): A 40-year-old
agency in Harrisburg that provides state grants and guarantees student
loans for college students. PHEAA manages $45 billion in grants and
Sallie Mae (SLM Corp.): Founded in 1973 as the Student Loan Marketing
Association. Based in Reston, Va., the corporation has more than $98.5
billion in loans outstanding to more than 7 million borrowers.