By Jaimeson Champion
Published May 5, 2007 12:32 AM
On April 15, Sallie Mae, the largest student loan provider in the U.S., was bought out for $25 billion by a group of investors from Bank of America, Goldman Sachs and two private equity firms.
The buyout was met with rave reviews on Wall Street. Sallie Mae’s share prices had shot up 15 percent on April 13 after information about the impending deal was leaked to the media. Investors were chomping at the bit to get a piece of Sallie Mae’s lucrative loan portfolio, which is estimated at $142 billion.
While the buyout has been heralded on Wall Street, the reaction on campuses across the country has been decidedly different. Today’s students, who represent the most heavily indebted generation of young people in this country’s history, decried the latest development in what has been a long series of retreats from government-supported education.
Sallie Mae was originally founded in 1972 as a way to provide government-backed student loans at below market rates. Its stated purpose was to enable greater access to higher education for students from low-income families. Sallie Mae’s Web site proclaims its mission as “Helping millions of Americans achieve the dream of higher education.”
While Sallie Mae was supposedly conceived as a company meant to serve the public good, it has in fact served private interests much more faithfully over its 35-year history. The recent buyout is just the culmination of a process that began almost immediately after the 1972 legislation creating Sallie Mae passed Congress. This process has enabled Wall Street to squeeze super-profits out of the student loan industry—not surprising, considering how the U.S. capitalist government itself is so totally under the domination of the banks, the oil giants and the military/industrial complex.
Indeed, the student loan industry has generated enormous amounts of wealth for the ruling elite. According to a recent CNN Money article, former CEO and current chairman of Sallie Mae, Albert Lord, raked in an astronomical $200 million in pay packages between 1999 and 2004. Tom Fitzpatrick, the current CEO of Sallie Mae, took home $16.6 million in salary, bonuses and stock options in 2006 alone. (CNNmoney.com, April 16)
The news of the Sallie Mae buyout comes on the heels of headlines around the country pertaining to preferred lender scandals, and investigations by various states’ attorneys general into the proliferation of “unethical” business practices among a number of student lenders, including Sallie Mae.
As a company now held by investment banks and private equity firms, Sallie Mae will be subject to much less outside scrutiny and oversight, which was obviously lax to begin with. At a time when the student lending industry is embroiled in controversy, the largest student lender has taken a major step towards becoming less transparent.
A generation of students with average debt loads of $20,000 or more after graduation cannot help but wonder if they are being purposefully exploited and shackled by debt. The need to intensify the struggle for free and universal access to higher education has never been greater.
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