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Posts Tagged ‘Sallie Mae’

student-loans-2

Nowadays, 43 million Americans owe student loans averaging $35,000. That’s because he or she who has the gold makes the rules in the US federal government.

Twenty years ago, the US Congress privatized the student loan program, which was supposed to give more Americans access to higher education.

In its place, lawmakers created another profit center for Wall Street and a system of college finance that has fed the nation’s cycle of inequality. Step by step, Congress has enacted one law after another to make student debt the worst kind of debt for Americans – and the best kind for banks and debt collectors.

Today, just about everyone involved in the student loan industry makes money off students – the banks, private investors, even the federal government.

For example, student loans made Albert Lord rich. Lord was the CEO who built Sallie Mae into a financial colossus through fees, interest and commissions on billions of dollars of federally guaranteed student loans. For delivering handsome profits to investors, Lord received pay and stock worth hundreds of millions of dollars. He also owns his own private golf course, thanks to everybody else’s student loan payments.

Student Loans

Then we can’t forget the bondholders. That’s right. Like mortgage backed bonds, there are hundreds of billions of dollars of student loan backed bonds. Who owns them? Not the folks who owe student loans. Wall Street investment banks, hedge funds and other assorted super-rich investors own them. When student loan borrowers make payments on their student loans, part of that monthly payment goes to the investors, who, coincidentally, have an incentive to keep pushing government to enact more laws and regulations to ensure that more students take out more debt, and cannot go bankrupt on their current debt.

In other words, the legal structure of student loans was changed back in the 1990’s to ensure that rich investors could suck millions of college students dry. Student loans have become simply another plot to redistribute income from working Americans to the rich.

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A doubling of student loan interest rates that happened on July 1, 2013 primarily benefits  Wall Street investment banks such as JP Morgan and Goldman Sachs.  These companies buy the student loans (which remain in the hands of Sallie Mae as the paid service provider). The companies then issue bonds backed by the student loans, and sell them to rich investors, hedge funds, investment banks, corporations and such. These banks and others get billions of dollars in fees every year from new student loans.

The more interest students are forced to pay, the higher the bonds can sell for, and the more attractive they are to investors, especially since they’re guaranteed by the government. In other words, America‘s higher education policies are intended to redistribute the income of the 99 to the 1 percent via higher student loan interest rates.

This shows how corrupt the US government and both political parties are; almost, and perhaps all, of the economic policies, or anything that touches on economics and finance, that has been legislated by the federal government during the last thirty years, has redistributed trillions of dollars of income from the 99 to the 1 percent every year.

Meanwhile, the federal government and the Federal Reserve have given tens of trillions of dollars to rich investors, investment banks and hedge funds to bail them out when their stupid investments turned out to be bad. This is a rigged game that shows how the government acts a corrupt conduit for a parasitic class of 1 percent.

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