A report out on Thursday from Huffington Post details how the college loan debt collecting company, Sallie Mae, is making a fortune off private student loans, while colleges–which are charging a fortune in tuition–are making money off of Sallie Mae. You don’t have to dig too deeply to see how troubling this is. As Huffington Post wrote:
“University endowments and teachers’ pension funds are among big investors in Sallie Mae, the private lender that has been generating enormous profits thanks to soaring student debt and the climbing cost of education. … The previously unreported investments mean that education professionals are able to profit twice off the same student: first by hiking the cost of tuition, then through dividends and higher valuations on their holdings in Sallie Mae, the largest student lender and loan servicer in the country.”
The concept is quite simple: as college gets more expensive, students incur more debt. And as students incur more debt, there is less opportunity for them to get out from under it. This is precisely why the relationship between Sallie Mae and institutions of higher learning are, as the article notes, “a conflict of interest.” And the affected party, America’s students (and parents), have very little clout in dealing with big banks and colleges admissions or financial aid offices. When you put together an enormously profitable company, like Sallie Mae, which generated a 21% return on equity last year, and allow colleges to invest in it, the student’s power is laughably dwarfed.
On Thursday’s All In with Chris Hayes, the reporters of the piece, Ryan Grim and Shahien Nasiripour, discussed their findings. Grim explained the genesis of the problem.”We place such a premium, such an emphasis on college, as we should in this country, that people are going to take the offer. It’s an offer you can’t refuse. When that’s the case, the lender is going to get as much as they can take–as much as they can conceivably get out of it.” We all want to go to college or to send our kids, and we’ll continue to go broke doing it. But when students sign on to years, if not decades, of debt, they aren’t aware that the place helping to strengthen their intellect is also helping to weaken them financially.