Obama Awards Contract to Student Loan Predators Who Swindled 60,000 Veteran Families

Sallie Mae has a long, dirty history (here, here, here, here, here, here, and here) of preying on those dependent upon student loans for a college education.  Recently, the dirty bastards spun off a company, which according to Forbes, is really the old, rotten version of Sallie Mae that we have come to hate:

The new company which is being spun out – Navient – is equivalent to the old Sallie Mae. It will continue to service the existing loans in the Sallie Mae portfolio, as well as service new loans via contracts with the Department of Education. It will also focus on servicing private student loans, as well as asset recovery (or getting students to pay something, or handle wage garnishments or other ways to recover old loans). 

In May of this year, Sallie and its new spin-off had to pay $139 million for stealing money from veterans.

Now Team Obama has decided to double down with its business philosophy of "why fix something that is already broken" with more money to keep the billionaires happy.

You can read the whole sordid story here at HuffPo:

The Obama administration plans to reward Navient Corp, the student loan specialist formerly owned by Sallie Mae, with new business some three months after federal prosecutors accused the company of intentionally cheating troops on their federal student loans, according to three sources familiar with the administration's plans.

The move is likely to stoke comparisons to recent multi-billion-dollar settlements reached between big banks and federal authorities over financial crisis-era misdeeds. Banks agreed to pay sizable sums, but public interest groups have criticized the settlements because the banks suffered few business consequences and their executives escaped criminal and civil charges.

"It's very disappointing," said Jason Collette, national organizer for Alliance For A Just Society, a network of state-based advocacy groups. "Until a company loses its federal contracts or a senior executive is punished, these fines are just the cost of doing business." . . .

The Daniels-Lumina-ALEC-Sallie Mae-Purdue-Gallup Index: What Everyone Needs to Know

by Doug Martin

As a means to hold Purdue and other universities “accountable,” Mitch Daniels, in late December, announced the Purdue-Gallup Index which will track how well students in higher education fit into the US workforce.  Anyone who followed Daniels' corporate school agenda while he was governor (or anyone following the corporate school leaders anywhere, for that matter) understands that using false measurements is a way to slash art teachers’ jobs and classes, fire teachers to create a temporary teaching workforce, turn schools completely over to private companies, and train workers for an imaginary workforce so that those who do land jobs will be paid pennies because of a flooded market. Now Daniels, Barack Obama, and others are starting to use the same disaster capitalism tactics on higher-education.  One only needs to look at the Lumina Foundation for Education, the main group funding the Purdue-Gallup Index to get a clue what this is all about.  

The Indianapolis-based Lumina Foundation for Education has $1.4 billion in assets and is a major player in the quest to completely privatize higher education across the country. A private outfit, Lumina promotes the skills-gap myth nonstop so that the public schools at all levels can be turned into workforce training grounds so corporations don’t have to pay their own money to train workers. 

But the group has even more sinister motives. Lumina was founded when the USA Group sold one billion dollars of student loan debt to Sallie Mae.  Lumina's board chair is John Lintzenich, USA Group's former CEO and former CEO of Sallie Mae. Part of Lumina’s Goals 2025 plan is to have 60 percent of Americans acquire college degrees, which will no doubt increase the profit of student loan lenders like Sallie Mae, which is still a funder of Lumina (watch at 13:46 here).

And Mitch Daniels, Purdue's president, has many ties to Lumina.

MITCH, MUTZ, AND THE INDIANA CORPORATE SCHOOL COMPLEX

From 2002-2010, John Mutz chaired the Lumina Foundation, now still sits on its board, directs the for-profit Clarian Health Ventures, and is on CID Equity Partners’ advisory board in Indiana. Mutz has spent over $100,000 funding the campaigns of Mitch Daniels, Daniels' Aiming Higher PAC, Tony Bennett, Todd Rokita, and Indiana Republicans, and in 2011 handed $5,000 to Mike Pence.

A past trustee for the Friedmanite and former-Indianapolis-based Hudson Institute, former lieutenant governor of Indiana, previous Conseco official (Conseco has had its fair-share of corruption, as I point out in Hoosier School Heist), and one-time president of PSI Energy, Mutz was Lilly Endowment’s president from 1989-1993. He was also a director at the rightwing GEO Foundation’s 21^st Century Charter School (tons of good dirt in my book on GEO), an Indianapolis Charter Schools Board member, and co-chair and funder of the billionaire Betsy DeVos-run front-group, All Children Matter, in Indiana. In 2006, All Children Matter was fined $5.2 million for funneling corporate school reform cash into Ohio, but that didn’t stop them from using Citizens United and Terre Haute lawyer James Bopp, Jr. to do the same dirty work to buy out legislators in Indiana and several other states a few years ago. 

And that was when the attack on Indiana schools truly began.

Alongside hedge fund managers calling themselves Democrats and Daniels and Bush family operative and current Lumina board member Al Hubbard (who used Jeb Bush and Betsy DeVos to write the corporate school agenda in Indiana before even Tony Bennett was aware of it), John Mutz helped buy out the Indianapolis Public School board race, so that the rich could carry on their school privatization in Indianapolis, regardless.
 
In October 2012, along with Eli Lilly, the Joyce Foundation (the school privatization outfit where Obama used to work), and Enron’s Arnold family, the Lumina Foundation financed Indy Mayor Ballard’s corporate school blueprint What’s Possible. 

Lumina Foundation and Eli Lilly both have operatives at Indiana University’s Tobias Center for Leadership Excellence, named after our good buddy Randall.  Randall Tobias, a big Mitch Daniels funder and one-time Eli Lilly chairman emeritus, is best known for his role in George W. Bush’s administration promoting a religious right anti-AIDS and anti-prostitution public policy while he himself was sleeping with prostitutes.  Tobias is a dear friend of multi-millionaire Christel DeHaan and helped raise money for her charter school franchise.  One of DeHaan’s charter schools recently received an “F” grade even though Tony Bennett rigged it the year before to make DeHaan, his campaign lady, happy. 

LUMINA AND ALEC; THE FUNDING, THE PROPAGANDA, THE PLAN 

Recently, the Lumina Foundation gave $150,000 to the Aspen Institute, which has Koch Brothers’ David Koch and Condi Rice, among others, on its board.  The Aspen Institute made its name as an anti-public school mega-rich outfit when Stand for Children’s Jonah Edelman bragged at an Aspen event about using hedge fund managers to buy out Democrats in Illinois to throw teachers and students under the bus.

This year, Lumina slid $75,000 to Mitch Daniels Leadership Foundation’s Arc Leadership Award, too, and Lumina has  funded the Bill Clinton-privatization spin-off think tank the New American Foundation and dozens of shady groups involved in higher education. 

In order to land a seat on its Education Task Force in 2008, Lumina gave $300,000 to the American Legislative Exchange Council, better known as ALEC, to kick in gear the complete privatization of state universities across America.  The Badger Democracy Blog (in an article worth reading in its entirety) points out that Lumina’s talking points of making it possible for every American to get a good college education is just a smokescreen.  Lumina’s “Four Steps to Finishing First” is a scheme to tie university performance to state funding, run universities like businesses, make faculty and staff pay more for their health plans, and spread online learning onto campuses.

Recently, Governor Scott Walker used Lumina to map the University of Wisconsin System's new online learning program, among other things, to beef up the “ALEC and neo-con, corporatic agenda to create a crisis" and "defund public education.”  

By founding and funding the Institute for Higher Education Leadership & Policy (IHELP) located at Sacramento State University in order to disseminate negative and false data and reports to the media, Lumina was also behind the corporate-driven California Community College Board of Governors task force on Student Success report, which led to a bill signed into law by Governor Brown recently.

Writing in the Chronicle of Higher Education in July 2012, Eric Kelderman says that

“Lumina's change in focus doesn't mean that the organization will be spending less money, he [Lumina’s leader Jamie P. Merisotis] said. In fact, the foundation will expand its efforts by convening business leaders, lawmakers, higher-education groups, and faculty members to build consensus on specific policy measures.

In addition, he [Lumina’s leader Jamie P. Merisotis] said, Lumina will draft model policies for states, including legislation. The group is already working with the American Legislative Exchange Council, a conservative-leaning organization, to write and introduce bills in statehouses.”

We all know how the ALEC-corporate party went down in Indiana's public schools, and now it's time for the universities to be dismantled.

Sarah Blaskey and Steve Horn sum up best the Lumina plan for Purdue and other universities:

NCSL [National Conference of State Legislatures} has received over $1 million since 2007 from the Lumina Foundation to push the higher education privatization effort in the states. By contrast, ALEC has received $595,000 since 2008 from Lumina, all according to Lumina's web site's section on grants.

The funding stream behind Lumina's existence speaks volumes about the higher education agenda it is pushing. "Lumina Foundation is a conversion foundation created in mid-2000 as USA Group, Inc., the nation's largest private guarantor and administrator of education loans, sold most of its operating assets to Sallie Mae," explains Lumina on its web site.

Sallie Mae, lo and behold, gave nearly $21 billion dollars in student loans in fiscal year 2009, feasting on skyrocketing student tuition fees, which are directly linked to the "flexibility" efforts the foundation Sallie Mae bankrolls is pushing through NCSL (and ALEC).

In the meantime, scores of students are defaulting on these student loans.

PREORDER DOUG MARTIN'S HOOSIER SCHOOL HEIST HERE

   

 

 

 

Add Corruption to Arne Duncan's Shortcomings

Elizabeth Warren calls him a lapdog--I think that is very generous of her.  From HuffPo:

The U.S. Department of Education risks becoming a “lapdog” as a result of recent actions toward financial companies such as Sallie Mae, Sen. Elizabeth Warren charged Thursday.

The Massachusetts Democrat said she was “deeply concerned” by a Huffington Post report that the Education Department had recently told Sallie Mae, the nation’s largest handler of student loans, that it intended to renew its federal contract to collect payments on federal student loans, despite pending investigations by at least three other federal agencies over allegations the company violated borrowers’ rights.

Warren, a member of the Senate banking and education committees, also said it was “shocking” that the department had not yet recovered some $22 million in allegedly improper payments made to Sallie Mae despite a 2009 recommendation from the department’s inspector general that it recover the debt.

“The Department of Education needs to be aggressive in watching out for students, not for profit-making loan servicers,” Warren said. “They’re there for our students, not to help loan servicers make a profit.”

The criticism comes as Education Secretary Arne Duncan battles perceptions that his department is too soft on the companies it pays to collect on federal student debt, while these companies are alleged to be harming borrowers and violating federal rules. Warren has been among his most outspoken critics, and on Sept. 19 she wrote him a letter demanding answers.

“The whole point of the letter was to make sure the Education Department is making it a priority to review its own contracts with an eye toward how Sallie Mae and others are executing on their responsibilities,” Warren said. “That’s what I’m trying to do.”

Stephen Spector, Education Department spokesman, said Thursday the department had not yet responded to Warren’s letter.

“Arne Duncan told me about a month ago that he was going to respond within a day or two, and then nothing,” she said. “We’ve been in touch with his staff since then, and they keep saying another couple of days. I’ve reached the point where I’m not sure what to expect from them.”

Warren also has targeted Duncan’s department for the extraordinary profits it has reaped off students who borrow from the government to pay for college. The profits, the result of the difference in what the government pays to borrow versus what it charges students, have increased in part because the department’s debt-relief initiatives have produced lackluster results, despite consistent prodding by the White House to improve.

With unpaid student debt approaching $1.2 trillion amid stagnating wages, a combination of higher debt loads and little-used default-prevention programs is leading to rising defaults and fueling government and financial industry concerns that student debt risks hindering economic growth in the coming years.

As borrowers devote ever-higher shares of their monthly incomes to repaying their student loans for longer periods of time, they reduce purchases of big-ticket items such as cars and homes, investments in potential new small businesses, and savings for retirement, policymakers have cautioned.

Officials ranging from Federal Reserve Chairman Ben Bernanke to Treasury Secretary Jack Lew have joined Rohit Chopra, Consumer Financial Protection Bureau student loan ombudsman, in warning about the potential economic dangers associated with increasing student debt burdens.

“We've got a crisis in terms of college affordability and student debt,” President Barack Obama said in August. “Our economy can’t afford the trillion dollars in outstanding student loan debt, much of which may not get repaid because students don't have the capacity to pay it.”

To Warren, the answer lies at the Education Department.

“This is really important -- the United States government should not be making aprofit off the backs of people trying to get an education, and the Department of Education is one of the front-line places that we could make real changes in every part of what goes on in the student lending business,” she said.

“It’s tough enough in a world of rising college costs and mounting student loan debtfor anyone to manage the cost of college,” Warren added. “The Education Department needs to be on the side of students. Their job is to be a watchdog, not a lapdog.”

The Dem Senators that Sallie Mae and Nelnet Bought

The leeches in the for-profit student loan biz have been busy buying votes to kill the reform to save billions in loan origination fees that pay for CEO jets, rather than poor kids' educations. From Facing South:

Who are the 6 Democratic senators poised to kill student loan reform?

Graduating from college is a great feeling. Not so great: being saddled with $23,200 in student loans, the average debt owed by graduates of the class of 2008, according to the Project on Student Debt.

Reforming the for-profit student loan system, which allows finance giants like Virginia-based Sallie Mae to make virtually risk-free returns thanks to government subsidies, was a top priority of President Obama. His idea, supported by most Democrats, was to take out the middle-man: Instead of subsidizing private lenders, the feds would completely take over origination of student loans.

The result: The Student Aid and Fiscal Responsibility Act, which the Office of Management and Budget estimated would save over $80 billion over 10 years (critics point out the number is inflated, because it didn't include money lost from defaults; but that's neither here nor there, because the government currently absorbs private losses anyway). Savings would be plowed back into Pell Grants -- much easier on students on the long-term -- and other higher education initiatives.

But as The New York Times writes today, this week six senate Democrats have threatened to derail the Act, writing in a letter to senate majority leader Harry Reid that "provisions of contemplated student lending reform that could put jobs at risk."

The letter was signed by Democratic Senators Thomas R. Carper (DE), Blanche Lincoln (AR), Ben Nelson (NE), Bill Nelson (FL), Mark Warner (VA) and Jim Webb (VA).

The senators' back-stepping, which likely scuttles the possibility of passing the Act with the filibuster-proof appropriations bill, comes after over a year of aggressive lobbying by heavyweights in the corporate loan industry. Sallie Mae alone spent $3.48 million on lobbying last year leading an all-out assault by industry reps claiming up to 35,000 jobs would be lost.

But proponents of reform have steadily hacked away at the bank's claims. First, it turns out the total jobs in student loans is closer to 30,000. But most importantly, the part of the industry the bill affects -- loan origination -- employs the fewest workers. According to Ben Miller at The Quick and the Ed (via Jane Hamsher):

Loan origination in its most basic form is the process of obtaining the money for student loans and transferring those funds to borrowers or to their institutions. This is a very inexpensive activity. According to information from the U.S. Department of Education, its complete cost of originating a Direct Loan last year was around $5.50. That figure includes around $1.50 in administrative and other expenses.

Sallie Mae and the big loan companies would still be able to service the loans, which is where most of the money -- and jobs -- are. Nelnet, Sen. Nelson of Nebraska's biggest contributor, saw their servicing revenues go up 13% last year after getting a contract through the Department of Education.

Why are the senators doing this? The first place to look for answers is the political muscle and deep pockets of the student loan industry. Between 2005 and 2010, Nebraska-based Nelnet has shoveled $63,100 to Sen. Nelson's campaigns.

Virginia senators Warner and Webb have to worry about Sallie Mae based in Reston, which employs 8,000 workers in Reston and has shown its willingness to play political hardball. Florida is also home to several leading student loan operations in the primary and secondary markets, and Sen. Carper's Delaware is ground zero for financial services outside of New York.

The more puzzling case is Sen. Lincoln of Arkansas. Her position on the Senate Finance Committee has made her a magnet for banking and finance campaign dollars ($246,700 for the 2010 cycle). But a search of her campaign contributions show no special ties to the student lending industry.

So how is siding with big lenders driving students into debt going to help her back home in Arkansas, which ranks in the bottom 15 states nationally for number of college-age youth getting a university degree?

Sallie Mae Digs in to Protect Student Loan Gold Mines

With the federal government threatening to return to a time when the people's people actually handled the administration of the people's student loans, the leeches in the student loan biz have rolled out the big guns to protect their gold mines. From the New York Times:

. . . .To press its case, the nation’s largest student lender, Sallie Mae, has hired two prominent lobbyists, Tony Podesta, whose brother, John, led the Obama transition, and Jamie S. Gorelick, a former deputy attorney general in the Clinton administration.

For lenders, the stakes are huge. Just last week, Sallie Mae reported that despite losing $213 million in 2008, it paid its chief executive more than $4.6 million in cash and stock and its vice chairman more than $13.2 million in cash and stock, including the use of a company plane. The company, which did not receive money under the $700 billion financial system bailout and is not subject to pay restrictions, also disbursed cash bonuses of up to $600,000 to other executives.

Sallie Mae said that executive compensation was lower in 2008 than 2007 and that the stock awards were worthless in the current market.. . .

Yes, things are rough. From 2002 to 2007, Sallie paid its CEO, Al Lord, $280,000,000 in salary and then came with a platinum parachute for Lord worth $225,920,802 (details from Inside Higher Ed).

Critics of the subsidized loan system, called the Federal Family Education Loan Program, say private lenders have collected hefty fees for decades on loans that are risk-free because the government guarantees repayment up to 97 percent. With the government directly or indirectly financing virtually all federal student loans because of the financial crisis, the critics say there is no reason to continue a program that was intended to inject private capital into the education lending system.

Under the subsidized loan program, the government pays lenders like Citigroup, Bank of America and Sallie Mae, with both the subsidy and the maximum interest rate for borrowers set by Congress. Students are steered to the government’s direct program or to outside lenders, depending on their school’s preference.. . . .

Sallie Mae and Her New Sugar Mamas?

The sleazebags that run the student loan corporations are in a panic. The House just passed its version of a relief bill that would cut interest rates to Boehner's army of loan sharks, cut $19 billion in subsidies to these bottom feeders, and increase Pell Grants. Sallie Mae's lobbyists have never been so busy trying to buy votes in the Senate to alter this picture, and it seems to be having some effect. The Senate version of the bill so far leaves the high interest rates in place, which could translate to billions for Sallie Mae.

Which version of the bill does this corrupt-to-the-core Administration like? And which one is it already threatening to veto? And which one is Sec. Spellings criticizing for not doing enough for minority students, while she lauds the other as "a good, strong step forward"? If you don't know the answers to these questions, go sit in the corner and put on your dunce hat.

And why has the Senate version not included thus far the cuts in interest rates that the House version includes? Could it have anything to do with Sallie Mae getting to Mary Landrieu, who could be poised to become the "John Boehner" of the Democratic side of the aisle in the Senate? From the Times:

. . . . The Senate plans to follow later this month with its own bill that would cut subsidies by $18 billion and increase Pell grants but not cut interest rates for borrowers. Because of special language inserted in the budget, the legislation is not subject to a Senate filibuster and needs only a simple majority vote to pass.

The White House revealed its preference yesterday, stating that if the House bill were the one to win final approval, advisers would recommend that the president veto it for not directing enough new money to the Pell grants for low-income students.

The lenders say they are fighting for survival. “Our view is that the combination of these cuts could destabilize the program significantly,” said Kevin Bruns, executive director of America’s Student Loan Providers, a Washington group. “Some companies are going to exit.”

The sponsors of the bills were dismissive of the accusations that black students would suffer. Senator Edward M. Kennedy, Democrat of Massachusetts and chairman of the Education Committee, said, “If Sallie Mae really wants to help minority students, it should support our bill to provide the largest increase in student aid since the G.I. Bill.”

But some of the lobbying appears to be paying off. Senator Mary L. Landrieu, Democrat of Louisiana, wrote in May to the majority leader, Senator Harry Reid of Nevada, echoing loan industry talking points.

“Some of the changes being discussed could have a very harmful impact on students, parents, colleges and universities in Louisiana, particularly those students attending the many historically black colleges and universities in our state,” Ms. Landrieu wrote.

Ms. Landrieu’s press secretary, Adam Sharp, said her letter was prompted by a letter from the president of Dillard University, a historically black institution in New Orleans. Mr. Sharp added that the senator was still studying the legislation and had not taken a final position. A spokeswoman for Dillard, Karen Celestan, said lenders had not communicated with the university.

Another Democrat, Representative Lincoln Davis of Tennessee, wrote a letter to Speaker Nancy Pelosi of California, expressing worry that cuts to the guaranteed loan program could hurt students. Mr. Davis’s press secretary did not return calls for comment yesterday.

Supporters of the legislation say they are being forced to work harder than they expected to shore up support, given recent revelations of conflicts of interest in the student loan industry.

“It’s made us increasingly busy in explaining why some level of subsidy cuts is really appropriate,” said Luke Swarthout, of the U.S. Public Interest Research Group in Washington.

The unions have also swung into action to counter lenders’ efforts to make inroads with their members.

“The student loan program has been subject to abuses that harm, not help, students and their families,” Richard L. Trumka, the secretary-treasurer of the A.F.L.-C.I.O., wrote to national and state union officials and the organization’s executive council.

Harrison Wadsworth, special counsel to the Consumer Bankers Association, said the organization had contacted chambers of commerce, as well as unions. “We didn’t target union leaders,” Mr. Wadsworth said.

At the United Negro College Fund, Dr. Lomax said he had listened carefully to the arguments of Sallie Mae and was unconvinced. “I was not prepared to support their position,” Dr. Lomax said.