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The Privatization Of College Student Loans In America

Elizabeth Warren Asks Why Government Is Loaning To Students At 20 Times The Rate That It Should

What has happened to our college education system in America? Why has the cost of a college education multiplied many times over within the last several decades? Has the government allowed the privatization of college student loans to occur, further expanding the wealth gap? Let’s explore. Shall we?

The SLM Corporation (aka Sallie Mae; originally Student Loan Marketing Association) is a publicly traded U.S. corporation that provides consumer banking [1]. Established in 1972, the former government institution has changed dramatically since its conception. In the era of common decency, it was a government entity that provided federal loans for students at reasonable rates.

In 1997, during the enterprising presidency of Bill Clinton, all of this changed for the worse, thus initiating the the new operation of privatizing. This process culminated at the end of 2004, with the termination of its federal charter, ending all formal ties to the government.

Just as deregulation had taken stride in the banking industry, “private” student loans became the new norm, and at one point a contract to service federal loans was employed. This was the beginning of privatization and the end of affordable education. Welcome to the New World Order.

“On April 30, 2014, Sallie Mae spun off its loan servicing operation and most of its loan portfolio into a separate, publicly traded entity called Navient Corporation.” Navient is partnered with the Department of Education as a collector of debt duo. What a cozy relationship, the merger of corporate and state.

“The Sallie Mae corporate headquarters is in Newark, Delaware. Sallie Mae also has offices in Newton, Massachusetts; Fishers, Indiana; Salt Lake City, Utah; and Reston, Virginia.”

US Senator Elizabeth Warren, a former professor of law at Harvard Law School, has been critical of Sallie Mae’s current role in the student loan process.

In June of 2013, Warren demanded that “Ed DeMarco, the head of the Federal Housing Finance Agency (FHFA), justify why his government agency is supporting the super-high-interest rate private students loans that are drowning many Americans in debt.” [2]

Senator Warren has noted that Sallie Mae is receiving loans at less than 1% interest from Federal Home Loan Banks and then loaning to students at a rate of about 20 times that. In one year alone, the profits amounted to approximately 51 billion US dollars.

Sallie Mae has ended ties with government and business is booming. “Since 1995, the company’s stock price has gone up almost 2,000 percent.” [3] This was a 2006 figure. What will the price be for students and taxpayers?

There’s another issue to wrangle with, as Warren explains to the public. A government entity (Federal Home Loan Banks) that is designed to assist future prospective home owners, is inadvertently doing the opposite, hindering students from owning a home.

1 “Sallie Mae”, Wikipedia,
2 Erika Eichelberger, “Elizabeth Warren: Why is the Government Backing Expensive Private Student Loans?”, Mother Jones, June 24, 2013,
3 Daniel Schorn, “Sallie Mae’s Success Too Costly?”, 60 Minutes, May 7, 2006,

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