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." . . .

For Profit Diploma Mills Collect Billions: Students and Taxpayers Left with Piece of Coal

From Pro Publica:

. . . .A recent investigation by the Government Accountability Office found instances of for-profit schools’ engaging in outright fraud to sign up unqualified students [3] (PDF) and warned that "the government cannot be assured that its student aid funds are only provided to students who have an ability to benefit from higher education.’’

Earlier this week, the department made public the default rates for students who graduated three years ago [4], reporting that students at the larger for-profits were defaulting at a rate of around 20 percent. Those are similar to levels, last seen during the early 1990s, that prompted the last major changes in how government regulates the industry.

Previously, the department published data only for defaults in the two-year window after students graduated. In general, those were relatively low. The numbers released this week show that by year three, the rates rise dramatically, as this chart shows. [2]

The three-year rates for some schools are high enough that, if those rates continued for another couple of years, those schools would no longer be permitted to write federal student loans [5] and grants, which cost the federal government $117 billion [6] (PDF), according to the Department of Education. The stimulus package pumped another $15 billion into education grants. The largest recipients [7] of both programs are for-profit schools. . . .

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.. . . .

Cuomo Nails Student Financial Services

In the vacuum created by a universal lack of oversight from Bush Co. and CEO of ED, M. Spellings, Andrew Cuomo has rushed in to fill the void. Cuomo's latest target for student loan scams: Student Financial Services of Clearwater, Florida. And, of course, the universities named below. The NY Times has this:

. . . . The company paid athletic departments at institutions for the right to print their logos and other insignia on marketing material used to sell loans to students, Mr. Cuomo’s inquiry found. A typical payment might have been $15,000, according to Mr. Cuomo’s office. In some cases, the company paid an additional fee to colleges for each loan application received, it found.

The company also used lists of students provided by universities to solicit business, and sent its sales representatives to push loans at university events, the investigation found. In an effort to build business, the inquiry found, Student Financial took university employees on golf outings and out for meals.

The universities whose names and logos the company used included Central Michigan University, St. John’s University, the University of Kansas, the University of Oregon, the University of Washington and Wake Forest University, according to Mr. Cuomo’s office. Of the 63 universities, 17 have already suspended their arrangements with Student Financial, including Florida Atlantic University, Georgetown University and the University of New Orleans.

But in some cases, an intermediary company held the right to use a university’s name, logo or other insignia, and Student Financial had its arrangement with that intermediary rather than with the university itself. This was the case at the University of Kansas, said Jim Marchiony, the university’s associate athletics director. He said the university had not received a fee based on loan volume. . . .

Senate Passes Student Aid Package

Yesterday it seemed that the corporate loan sharks would get a cut in their subsidies reduced when Ben Nelson (D) of Nelnet's home state, Nebraska, introduced an amendment to reduce the subsidy cuts by $3 billion. Good news--the amendment failed, and late last night, the bill passed. A few details from the N. Y. Times:

. . . .Like the House measure, the Senate bill eases the repayment burden for student borrowers. It limits monthly payments on direct student loans to 15 percent of a graduate’s discretionary income and offers complete loan forgiveness after 10 years to public service employees.

It raises the maximum Pell grant more than the House bill did, to $5,100 by next year and $5,400 by 2011. And it creates a category of stipends, Promise Grants, which would make up the difference between Pell grants and any family or college contributions to cover the full cost of attendance for the neediest students.

Arguing that the bill would jeopardize small and medium-size companies, lenders tried to stave off some cuts through a last-minute amendment sponsored by Senators Ben Nelson, Democrat of Nebraska, and Richard M. Burr, Republican of North Carolina, that would have cut the loss of government subsidies to lenders by about $3 billion.

Supporters maintained that the amendment would have eased the pain for lenders without sacrificing aid to needy students. But critics, backed by a report by the Congressional Budget Office, disputed that claim. The measure was defeated, 61 to 36.

Both the tone of the debate and the results of the vote reflected the decline in fortune of the student loan industry after inquiries by Congress and the office of Andrew M. Cuomo, the New York attorney general revealed improprieties in the industry. . . .

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.