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Rolling Jubilee: A Wolf in Sheep’s Clothing?

authored by Alan Collinge of the Student Loan Justice Organization, a grass roots group seeking the swift return of standard bankruptcy protections and other consumer protections to all student loans in the U.S.

“We started by going after Sallie Mae debt because Sallie Mae is for my generation sort of the Voldemort, this cosmic level of evil out there,” Gokey said. But after suggesting that Sallie Mae typically sells those debts for 15 cents on the dollar, St. Peters abruptly changed course and refused to deal with Gokey and Debt Collective, he said. (St. Peters did not return a call seeking comment.) Think Progress, “Debt Activists Just Canceled $4 Million In Student Debt. For Their Next Trick, They Need Your Help”

In recent weeks, much media attention has been focused on a project dubbed the “Rolling Jubilee”- an action whereby people’s defaulted student loans are purchased for “pennies on the dollar” with donated money, and the debt is extinguished. To date, the Jubilee claims to have forgiven some $4 million in defaulted student loan debt at a cost of about $100,000.

Sounds like a great idea, right? After all, who would not want their student loan debt to be paid off for them? Looking at the board members for the Rolling Jubilee (which includes Occupy Wall Street pioneer David Graeber), one could only assume this would be a slam dunk for the 99%. Further evidence that they may be onto something: Sallie Mae’s Douglas St. Peters has criticized the project, and the concept of loan forgiveness generally (if the banks oppose it, its got to be good, right?). Surprisingly however, it turns out that this project is, I am sorry to report a terrible idea with troubling implications. Consider the following and see if you don’t agree:

Putting aside the obvious criticisms- that the project only applies to private loans and does nothing to address the rising cost of college, skyrocketing debt loads, or the uniquely predatory nature of the debt due to the removal of fundamental consumer protections (like bankruptcy) that exist for all other loans, the most troubling aspect of this project lies in the systemic effect of the project- who it helps, and who it really doesn’t. Upon examination from this perspective, the project reveals itself to be, frankly, suspicious.

Think about it. The RJ, by purchasing defaulted debt, only “feeds the beast”, and in fact makes defaulted debt more valuable on the market. This rewards the horribly predatory behaviors that the absence of bankruptcy protections and other factors have enabled in the private student loan industry. Since, after exhausting all existing opportunities for collection of these loans, the debt holders know there is a buyer for the “worst of the worst”, this only encourages the lenders and loan holders to inflate this debt as much as possible, with the knowledge that there is a willing buyer for even the worst performing loans! So that is quite a red flag,

Being a long time Zucotti Park resident myself, I’d almost be willing to overlook this distasteful aspect of the project, and instead focus on the suffering that this transaction eased…but there again, we get an unpleasant shock: The loans that the project buys are almost certainly at or past their statutes of limitations(private student loans still have these), and/or were likely never paid on by the borrower much if at all. So while it is impressive to hear of the large amounts of debt being forgiven, the fact is that the people who are finding their debts erased more than likely won’t care much because they are either no longer under any legal obligation to pay the note and have long since forgotten about it, or never intended to pay the note in the first place, and never would! So these borrowers won’t likely be gushing with praise and thanks, and frankly won’t be helped much if at all by the repurchase of the debt. I suspect that people learning of their debt being purchased and erased were, instead of relieved and grateful, were more perplexed as to why anyone would go to the trouble of clearing up debt that they themselves had forgotten about long ago! By far, the happiest participant in these transactions, are the banks/collection companies who are thrilled to get anything for the loans! People with cosigners for their loans (about 90% of private loan borrowers), and people who have been paying at least something for their debts should not hold their breath if they are hoping to one of the lucky few to get their loans absolved- it simply won’t happen.

So this project does very little for the borrowers it affects, and nothing but encourage and exacerbate the predatory underpinnings of the lending system by rewarding instead of resisting it (Resistance being an oft-repeated theme by the folks running this program, and its affiliated organization, dubbed Strike Debt). There is no resistance, here, only paying into a predatory lending system for almost no real benefit. I wouldn’t go so far as to call bullshit on this project, but it is really, extremely tempting to.

Unless there were grand plans to somehow buy off ALL student loans in the country- and I’ve been told that there isn’t, there is almost nothing good to say about this project, and a lot of troubling questions that cry out for answering.

It is surprising to me that the well regarded people (David Graeber, Andrew Ross, and Astra Taylor) who sit on the board for this project would let their names be attached to it upon reflection.

Notes and References:

Debt Activists Just Canceled $4 Million In Student Debt. For Their Next Trick, They Need Your Help Alan Pyke, “Think Progress”

“The Argument” Alan Collinge, Student Loan Justice Org.

Strike Debt is a nationwide movement of debt resisters fighting for economic justice and democratic freedom. You are not a loan.

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Freedom! Liberty! And Being For the Little Guy. As Brought to You By the Conservative Movement.

Update appended below. (Second indented quote format also corrected.)

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In the Comments thread to Dan Crawford’s post below titled “Kalamazoo County Michigan…People and Offices to Write to Protest the Stealing of a Home,” I wrote:

Dan, you don’t understand. This is freedom, see. I mean, it’s not like it’s the FEDERAL government that’s doing this. It’s a local government that is doing it, so how could this be anything other than freedom! liberty!??

A huge part of the Conservative Movement has been to simply shift the funding of government from progressive taxation to exorbitant fines and fees for traffic violations, parking tickets, misdemeanors of other sorts, property forfeitures of large amounts of money or homes or cars, home foreclosures and forfeiture of the entire proceeds from the sale of the home for failure to pay a small property tax bill (including if you didn’t know that it was due or was not paid).

This is all part of freedom! Liberty! The private contractors for government services and operations, and the police and judges whose conflict of interest ensures the more-than-adequacy of this method of government funding, have to be paid, y’know.

In the last two weeks, the Washington Post has run a slew of articles on all this. Links to some of the articles are:

http://www.washingtonpost.com/news/the-watch/wp/2014/09/03/how-st-louis-county-missouri-profits-from-poverty/

http://www.washingtonpost.com/posteverything/wp/2014/09/10/all-i-wanted-was-to-visit-my-dying-father-now-i-owe-massachusetts-10000/

http://www.washingtonpost.com/local/trafficandcommuting/withering-inspector-general-report-criticizes-dc-parking-and-traffic-ticketing/2014/09/08/da6ae324-3781-11e4-8601-97ba88884ffd_story.html

http://www.washingtonpost.com/sf/investigative/2014/09/06/stop-and-seize/

http://www.washingtonpost.com/sf/investigative/2014/09/08/they-fought-the-law-who-won/

http://www.washingtonpost.com/sf/investigative/2014/09/08/they-fought-the-law-who-won/

In that thread, Dan linked to an Alternet article by David Morris about two Kentucky officeholders, a town mayor and a state senator, cousins both with the last name Girder, who are on opposing sides of the “Government is the problem, not the solution” slogan = policy thing.  The article explains:

On July 19, after years of complaints about local gasoline prices being higher than those in surrounding communities, the city of Somerset decided to take matters into its own hands and began selling gasoline directly to the public. Two-term state senator Chris Girdler immediately declared, “socialism is alive and well in Somerset.” Two-term mayor Eddie Girdler, a distant cousin, responded, “If government doesn’t do it to protect the public, then who does it?”

In an interview, Girdler, paraphrasing Ronald Reagan’s famous dictum insisted, “the government is not the answer—government’s the problem.” Regrettably the interviewer did not remind the readers that government laid the very foundation of Somerset’s economy. In 1950 the Army Corps of Engineers completed construction of one of the largest man-made lakes in the world. A little over 100 miles in length with an average depth of 85 feet, Lake Cumberland “transformed Somerset from a sleepy rural community into one of the largest recreation centers in Kentucky, drawing more than 1.7 million visitors annually.” It would have been instructive to discover whether Sen. Girdler would describe Lake Cumberland as a “socialist enterprise.”

Girdler wants to protect us from big government. Senator Girdler approvingly cites Ronald Reagan’s famous dictum, “You can’t be for big government, big taxes and big bureaucracy and still be for the little guy.” Mayor Girdler wants to protect us from the predations of big giant corporation and he views government as a proper vehicle for doing so. “It’s the role of government to protect us from big business,” he maintains.

So there you have it: You can’t be for big government, big taxes and big bureaucracy and still be for the little guy. Uh-uh. No, Sir.  No way.  The way to be for the little guy is to remove all government protections vis-à-vis private corporations and state and local police forces and courts.  It means privatizing traditional government operations and services, and funding government operations and services (whether already privatized, or instead still directly operated by state, local, or the federal government) entirely by huge, spiraling fines and fees for trivia, and by confiscating cash and homes and cars to resell.

Being for the little guy also means allowing banks to do whatever they please, including making billions of dollars a year in fees for tiny overdrafts—something that the Democratic-controlled House and Senate, and Obama, banned via statute in 2010—and including allowing mortgage companies to misrepresent mortgage terms.  And it means allowing monopolistic credit card companies to charge small businesses outrageous rates for small credit card purchases by their customers.  So in order to be for the little guy, we damn well better repeal the several laws that prohibit these things, enacted by Congress and signed into law by Obama in the two years before the Dems lost control of the House and lost their filibuster-proof majority in the Senate.

Yes, Sir. We’re talkin’ being for the little guy, here!

Being for the little guy also means, of course, removing Big Government—or any government—from direct involvement in, or regulation of, college-student loan programs.  Access to higher education is not an appropriate function of government. I know this for a fact, because this was an official policy of the Reagan administration, expressly stated by a member of Reagan’s cabinet.  Which explains not just the dramatic reduction of reasonable-interest-rate student loans since, y’know, 1981, but also the extreme reduction in direct state and indirect federal funding for state public universities and colleges—since, y’know, 1981.

Uh-huh. The Conservative Movement, and certainly the Conservative Legal Movement, are all about sleight-of-hand redefinitions of common terms, and rely in the extreme on the idea of government-by-slogan, government-by-cliché.

The Koch brothers are little guys.  Who knew?

This continues to work well for them so often, politically, because the Democrats have allowed it to, by failing—refusing—to address it, in particulars, head-on.

To wit: The witless campaign that Alison Lundergan Grimes, the Kentucky Dem nominee for Senate, is running in her effort to dethrone Mitch McConnell. Hey, Ms. Grimes: How’s that I’m-a-tough-Kentucky-woman-so-Kentucky-women-will-vote-for-me campaign goin’ for ya?  Might it now be time to try somethin’ different?  Like, addressing specifics of Dem public policy and recent Dem legislative achievements—and Repub votes on such things?  Nah.  You’re a tough Kentucky woman! So policy won’t matter in the outcome of the election.

Which it won’t, you can be absolutely sure, as long as you don’t deign to mention any of it. Are you really gonna allow election day to come without, like, informing the electorate that, uh, Kynect is—OMG!—Obamacare, and that McConnell has promised to defund it if the Repubs gain control of the Senate?  I mean … really?

This woman’s campaign, more than any other this year, just dismays me.  Then again, I myelf don’t give a damn that she’s a tough Kentucky woman.  (Or, for that matter, that she’s a woman.)  And apparently, either do all that many Kentucky women.  She may well be tough. But tough, it turns out, is not the same thing as gutsy.

I’m so, so, so, so, so, so tired of watching this kind of campaign—this flaccid, craven, I’m-embarrassed-that-I’m-a-Democrat genre—from Democrats.

Especially since IT DOESN’T WORK.  Really; it doesn’t work.

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UPDATE:  Well, well. Our newest wingy troller, Jack, wasted only 16 minutes after I posted this post before commenting:

The standard false dichotomy fallacy — if you’re against Big Government, you must be against ALL government.

The Powers of the U.S. government is clearly spelled out in its Constitution, and the States and the people retain the rest. If you say that those who want the U.S. government to not exceed the Powers given to it by the States in the Constitution, want no U.S. government at all, then you must believe that the States, in that Constitution, ceded no Powers at all to the central government.

I, in turn, wasted only 18 minutes—I’m just not as quick as he is; I’m a liberal, after all—before replying:

Ah. That’s right, Jack. The issue isn’t what powers the Constitution–the original document, the Bill of Rights, the succeeding amendments (including the reconstruction amendments) give to the federal government vis-a-vis the states. No, the issue is cliches referencing the enumerated powers, but of course only generically.

I do understand that your brand of constitutional interpretation holds that Freedom! Liberty! means he freedom of state and local governments to violate even the most fundamental of constitutional and human rights of individuals–as long as those rights don’t involve, y’know, gun-ownership rights or one of the other select few rights that you folk hold dear.

I also understand that you and your ilk conflate laisse faire economic and fiscal policy with “the enumerated powers”. You’re Rorschach interpretation of the Constitution is tiresome and ridiculous, albeit widely recited, mantra-like, by the far right.

Ideology is not the same as fact. Nor is it the same as the enumerated powers. Except, that is, when, as now, there is an aggressive hijacking of constitutional law by five members of the Supreme Court and Federalist Society lower-level federal appellate judges.

Enough said?  No. But that’ll have to do, for now.

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Republicans say they killed the bill that would lower interest on existing student loans because it does nothing to cure cancer … er, it does nothing to lower college costs and therefore reduce borrowing. Or cure cancer.

Republicans said the bill wouldn’t have done anything to lower education costs or reduce borrowing, and they accused Democrats of playing politics by highlighting an issue that was bound to fail.

— Senate Republicans block student loan bill, Erica Werner, Associated Press, today

The bill, written and sponsored by Elizabeth Warren, would allowed borrowers, including those with “years-old debt and interest rates topping 7 percent or more, refinance at today’s lower rates,” the AP article specifies, and “would have been paid for with the so-called Buffett Rule, which sets minimum tax rates for people making over $1 million.”  The vote was 56-38.

Should the Republicans actually be interested in doing something to lower higher-education costs and consequently reduce borrowing, they might consider reinstating substantial federal financial assistance to states in order to help the states once again fund their state universities and colleges at, say, the pre-Bush-tax-cuts-era levels, so that these universities and colleges weren’t being funded mostly by tuition.

And should Republicans actually acknowledge that current high levels of student debt–debt already incurred, which was the subject of that bill–won’t recede even if college and university attendance suddenly were made free of charge, and concede that the high level of current debt is itself a problem, they will stop claiming that you shouldn’t try to help students and former students who are deeply in debt unless you also fix an unrelated problem, or even also fix a problem that is related but not in a way that matters to the proposed fix.

So the current Republican excuse for refusing to tackle any actual problem is that any fix wouldn’t affect every problem we have. The problem for the Republicans that this tactic won’t fix is that the many millions of people directly affected by the particular problem recognize the Republicans’ non sequitur for what it is.  And so do most other people.

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This is another in my series of posts on the Republicans’ steady diet of cliches and nonsensical slogans as their campaign modus operandi.

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Updated cost projections for the Pell Grant program

New America points us to Pell Grant cost projections:

The Congressional Budget Office this week released updated cost projections for the Pell Grant program – and the estimates show an unexpected surplus over the past several years. The figures are much awaited because they dictate what lawmakers must allocate to the program in the upcoming fiscal year 2014 appropriations process if they want to keep the program running at its current level of benefits and with existing eligibility rules.
In 2010 and 2011, those estimates sparked panic. The program was burning through money faster than anyone expected, prompting Congress and the Obama administration to shift funding from other programs and cut parts of the Pell Grant program itself three separate times.

The funding emergency was exacerbated by the fact that congressional lawmakers and the Obama administration had tried to maintain a large increase in the maximum grant, first funded without any long-term funding plan by the American Recovery and Reinvestment Act of 2009. The latest round of temporary funding was set to dry up in 2014, leaving a $5.8 billion hole in the program. In 2015, the number would jump to $8.7 billion, and stay at about that level indefinitely.

Luckily for procrastinators in the White House and on Capitol Hill – and for Pell Grant supporters – the latest Congressional Budget Office estimates have come to their rescue. According to CBO, the program was actually overfunded the past few years, leaving a surplus of $9.2 billion. The CBO doesn’t give much explanation as to what changed. For that we’ll have to wait for the president.

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Learning To Owe

A few thoughts from a friend of mine and an introduction from a movie I (run75441) watch each year.

“I don’t need 24 hours. I don’t have to talk to anybody. I know right now, and the answer’s no. No! Doggone it! You sit around here and you spin your little webs and you think the whole world revolves around you and your money! Well, it doesn’t, Mr. Potter! In the, in the whole vast configuration of things, I’d say you were nothing but a scurvy little spider!” George Bailey

Learning To Owe

by The Bell

The Cost of Education Is Crushing the Opportunity We Mean It to Provide

The Occupy Wall Street movement has no formal goals but several consistent memes have emerged among the crowd demonstrations in various cities across the country. Most of these have to do with the concentration of wealth and the collusion/corruption between big business and government. However, a more selfish trend also has surfaced among the demonstrators – many want their college student loans forgiven.

A small, informal survey among New York protestors last week by equity research analyst David Maris found ninety-three percent of them advocated student-loan clemency. This idea actually is neither original to OWS nor unique among its members.

clip_image001

Sign bewailing large student loan debt
from one Occupy Wall Street protestor

New York University Professor Andrew Ross recently proposed a radical solution to student loan debts the he calls “A Pledge of Refusal.” The idea requires those who owe to sign a pledge to stop making payments on their student loans once the pledge garners a million signatures. Meanwhile, an online petition supporting student loan forgiveness has collected over a half million signatures.

President Obama announced a plan last week to provide student loan relief. First, he is reducing the maximum repayment on student loans from fifteen percent of discretionary annual income to ten percent. Second, he will allow borrowers to combine loans from the Family Education Loan Program with direct government loans, with a lower consolidated interest rate. Obama plans to use his Executive authority to bypass Congress for this program.

Democratic Representative Hansen Clarke of Michigan wants to go even further. He has introduced legislation (H.R. 365) that includes creating incentives for banks to negotiate with distressed lenders, providing tax credits for education expenses and student loan debt, and making more private student loans eligible for discharge in bankruptcy proceedings.
Both Obama’s and Clarke’s solutions fall short of general clemency but protestors are unlikely to obtain this remedy. A Rasmussen poll found only twenty-one percent of American adults in favor of blanket forgiveness as contrasted to sixty-six percent opposed. Many feel clemency would be unfair to lenders as well as those borrowers who repaid their student loans. At worst, they write off OWS protestors and other advocates for loan forgiveness as spoiled, lazy slackers who expect a free ride.

Such epithets are unfair, counters conservative columnist Nicholas Kristoff this week in the New York Times. “While alarmists seem to think that the movement is a ‘mob’ trying to overthrow capitalism, one can make a case that, on the contrary, it highlights the need to restore basic capitalist principles like accountability.” Kristoff goes on to deplore how “some financiers have chosen to live in a government-backed featherbed. Their platform seems to be socialism for tycoons and capitalism for the rest of us . . . they can privatize profits while socializing risk.”
Representative Clarke concurs that most protestors “are not asking for [a bailout]. They are simply asking for a system that is not rigged against them.” When big bankers and investment firms can make poor decisions without suffering obvious consequences, then the motivation for individuals requesting similar absolution may not be admirable but it is understandable.
While the current crop of students and recent graduates may be whining about the problem more than past generations, they face an objectively bigger problem. This year, the average borrower graduating from a four-year college left school with roughly $24,000 of student debt, with ten percent facing debt of $40,000 or more, according to the College Board. Total student loan debt will exceed $1 trillion this year and it now exceeds outstanding credit card debt, according to the Federal Reserve Bank of New York.

Only seven percent of graduating bachelor’s degree holders come from the bottom quarter of income earners, as compared to twelve percent back in 1970. Intended as relief and opportunity for the distressed poor, student loans have become an unavoidable middle class reality. In addition, a series of laws passed by Congress last decade have increased the difficulty of discharging debt, including student loans, through bankruptcy.
The website College Scholarships reports on several programs that forgive or reduce student loan debt for graduates willing to work in high need/disadvantaged areas. The problem is such programs are limited to highly targeted professions, such as nurses, attorneys, and teachers. What is more, they often require a minimum of five years experience. Traditionally, graduates take such jobs immediately after graduation to acquire experience, when they are most inclined to social activism and less acclimated in their lifestyles to larger salaries.

I attended college for six years, ultimately earning a master’s level degree in 1984. I won several scholarships, based on merit; qualified for several grants, based on need; and I worked. In spite of this, I fell short of the necessary money for tuition and books on a couple of occasions. I took out a couple of federal student loans to make up the difference that I was able to repay within a few years of graduation.

Contrast my experience with that of Robert Applebaum, who graduated from Fordham Law School in 1998 with about $65,000 in debt. After going to work as an Assistant District Attorney in Brooklyn, his salary forced him to put his student loans in “forbearance,” which prevents default but allows continued accrual of interest. Applebaum began repaying his loans upon leaving the DA’s office in 2004 but remains $88,000 in debt today.
Tommaso Boggia is an MPA candidate at Presidio Graduate School and an advocate for student loan clemency. He writes at the website Triple Pundit, “Regardless of work ethic, more and more middle class families are slipping into poverty, in part because of the heavy debt burden of house ownership and of pursuing a higher education degree . . . A whole generation is seeing their plans and ambitions shackled by the extra weight of their student loan payments. These young people are unable to buy a home, start a family, or do the socially important but underpaid jobs in the social services sector.”

In the post-World War II era, a college education was the chief means by which children from working poor families could leapfrog into the middle class or even affluence. Increasingly, however, the cost of this requirement is becoming the very thing holding them back from the opportunities promised by the American Dream.

The most cited reason for exploding debt is the ever-increasing cost of college. Average in-state tuition and fees at four-year public colleges rose an additional eight point three percent in 2001 alone, passing $8,000/year ($17,000/year with room and board). In addition, the American Council on Education notes that budget cuts and other austerity measures have reduced state appropriations to higher education by eighteen percent over the last three years.

Richard Vedder, Director of the Center for College Affordability and Productivity and author of the book Going Broke by Degree – Why College Costs Too Much, maintains that we are looking at the problem exactly backwards. Writing in the National Review, he argues that just as an abundance of easily obtainable, low interest mortgages spurred the housing bubble that caused the 2008 financial crisis, “Arguably, federal student financial assistance is creating a second bubble in higher education.”

Vedder also points out that government doles out loans without discrimination to a student’s prospects of success in college, despite the fact that over forty percent of those pursuing a bachelor’s degree fail to receive one within six years, or chances of success after college, regardless of whether a student’s field of study offers poor versus good job/career availability. During a 2011 PBS NewsHour appearance, Vedder argued American society must “open up opportunities for people to consider a variety of different options after high school, one of which is college, but there are many others.”

Most of us may not agree with those advocating total clemency for student loan debt. While this solution may be overly simplistic and impractical, it seems clear that some reforms are necessary – whether the efficiencies proposed by Obama, the incentives proposed by Clarke, or Vedder’s more draconian measures toward higher education in general. It also means we need to give OWS protestors and other loan forgiveness advocates more credit for identifying a real, substantive, and systemic problem beyond their selfish interests.

If we value an education for our children as much as we claim, our society has to find a way to re-engineer it back from the crushing burden it has become to more of the opportunity we aspire it to be. Right now, the main thing we are teaching our kids is learning to owe. This is neither opportunity nor American exceptionalism.

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Sallie Mae couldn’t have predicted…Model Validation Part 3


Higher Ed Watch reports on Sallie Mae:

Last week, we wrote that Sallie Mae and its promoters on Wall Street claim the company was “blind-sided” by the rising default and delinquency rates on subprime private loans it made to low-income and working class students at poor performing higher education trade schools. It’s a convenient argument considering that the loan giant is facing at least one, and possibly several, class action lawsuits by angry shareholders who accuse the company of deliberately misleading them about the amount of risk it was assuming. But the argument is disingenuous at best.
Financial analysts have long raised red flags about Sallie Mae’s private lending practices. During earnings calls and at shareholder meetings and investment conferences, analysts regularly peppered Sallie Mae officials with questions about whether the company, which is used to having government backing on its loans, had the expertise needed to assess the risks associated with lending unsecured, private loan debt to financially-needy students.
….
In 2005, Fortune Magazine brought attention to the analysts’ worries in an article entitled, “When Sallie Met Wall Street.” That piece specifically raised concerns about the loan company’s dealings with schools owned by Career Education Corporation, which it noted had had been accused “in multiple lawsuits in several states of using hard-sell tactics to recruit students, promising them high-paying jobs that don’t materialize and leaving them with mountains of debt that they can’t pay off.”
The article’s author — Bethany McLean (who, by the way, helped break the Enron scandal) — proved prescient in predicting the predicament in which Sallie Mae now finds itself. McLean wrote:
[A] big question looms in Sallie Mae’s private credit business: How many students who take out these high-interest loans will end up defaulting? After all, private credits are basically unsecured loans to people without jobs. Sallie argues that there won’t be a problem. Each quarter it books a reserve for potential losses; at this time its loss on private credit loans in repayment are running at only 2.4%. Plus, Sallie says, almost half its private credit loans are guaranteed by a parent.
But because private credit is a new business and because students are taking on unprecedented levels of debt, there are no historical measurements by which to gauge potential defaults. As Sallie’s financials note, “the provision for loan losses is inherently subjective as it requires material estimates that may be susceptible to significant changes.” And the current low delinquency rate may be misleading, because as of the end of 2004 nearly half the students to whom Sallie has lent private money hadn’t left school yet.

Lots of financials are changing.

Update: PGL posted on Student loans and default risk in January, 2007.

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