Sallie Mae and Me, part three: Lesson learned

*Continued from two previous posts: “Running down the Devil, or Sallie Mae and Me” and “Sallie Mae and Me, part two”

After speaking with customer service reps from both entities, I gave up on reaching any satisfactory answers about my student loans from Sallie Mae/Navient or FAFSA. I also knew that calling the Department of Education to dispute my school’s Title I status was pretty pointless. If it were possible for my school to have received Title I funds, I feel certain that someone in our school system would have arranged for that . . . it was time to give up on the Teacher Forgiveness program. That dog won’t hunt.

Having to look elsewhere, I found The National Consumer Law Center, whose motto (or subtitle) is: “Advancing Fairness in the Marketplace for All.”  Atop the NCLC’s page on student loans, I found this within the page’s mission statement:

We also seek to increase public understanding of student lending issues and to identify policy solutions to promote access to education, lessen student debt burdens and make loan repayment more manageable.

These sounded like my kind of folks.

On their slightly intimidating list of “Hot Topics,” two reports with long, academic titles caught my eye: “The Sallie Mae Saga: a Government-Created, Student Debt Fueled Profit Machine” from January 2014, and “The Student Loan Default Trap”— look out, Lee Siegel!

The “Introduction” to “The Sallie Mae Saga” reveals some scary shit about the student loan giant. First, Sallie Mae was created during the Richard “I am not a crook” Nixon administration, and it “became a fully private company in 2004”, during the presidency of George W. Bush, who also tried to privatize Social Security. A little further down the “Introduction,” we learn that Sallie Mae “has been extraordinarily profitable,” and their “return on equity” is “one of the highest among American companies.”

Continuing through “The Sallie Mae Saga,” I learned about the immensity of the corporation that I’m struggling against. From its Nixonian inception in 1972 until 1988, the company’s “assets grew from $1.6 billion to $28.6 billion.” From 2010 through 2013, as I’ve plugged away with my monthly $204, Sallie Mae’s “net income” has risen from hundreds of millions to well over a billion dollars annually. To ensure continuity of these trends, they spent more than $22 million on lobbying efforts from 2007 through 2013.

So while I’ve been sending my little piddling payments month after month, the folks at Sallie Mae/Navient are earning and squirreling away amounts of money that are unfathomable to me. Let’s take a minute to remind ourselves of what a billion dollars looks like when it’s all written out— $1,000,000,000.00 According to this report, Sallie Mae/Navient has a couple dozen of those.

Curious too about the “The Student Loan Default Trap” report, I downloaded it and began with the Executive Summary. As I read the first paragraph, I thought, You’ve got to be kidding!

The United States government has responded to growing levels of student loan debt by creating an array of borrower assistance programs. Getting this relief, however, is rarely easy. Government programs are unnecessarily complex and borrowers too often confront an impenetrable bureaucracy that prevents them from accessing their rights. To compound these problems, there are few reliable resources borrowers can turn to if they need help.

That sounds distinctly familiar . . . As an ordinary guy, a John Q. Taxpayer, just scratching the surface of this conundrum has been frustrating. Reading on, I saw that this report has little to do with my situation. It mainly details abuses and predatory practices related to customers who are in default. Apparently, a whole other side of the industry exists, which preys on uninformed, desperate or easily duped people whose debt is completely out of hand. I may be aggravated by my situation, but I’ve still got it in hand (for now).

Also on the NCLC’s student loan webpage was a report titled “Statement before the Middle Class Prosperity Project: Tackling the Student Loan Debt Crisis.”  In this report, a lawyer for the NCLC outlines their hopes about student-loan reform, beginning with an assertion that “despite some declines in profits, the federal government is still expected to produce $110 billion in profits over the next decade.” Should a public-sector program, which was designed to help low-income people get an education, be turning massive profits? No, what we need is “a government agency that clearly puts students first.” While I understand and respect that Sallie Mae and all other student-loan providers must turn a profit to stay capitalized and to pay their employees, keep the lights on, etc. . . . a billion dollars a year in profits seems a little much.

Once again, however, this report has little to do with me. The NCLC’s mission, stated overtly, is to help low-income people, and I’ll be honest: I’m not living in poverty. The programs that help people stand up against the student-loan system are mainly designed to fight abusive and predatory practices against the most vulnerable folks. While I agree with that mission, and I applaud it, I still have to ask, what about people like me? 

Essentially, this brief stint of research has revealed that I have no viable options. The Teacher Loan Forgiveness program is not open to me, nor is any other program like it. I have not found any non-governmental or non-profit grant programs that would help me. Other than repayment, consolidation remains my only other choice.

Yet, using the Federal Direct Loans Consolidation website, my best option under consolidation would be to pay $224 per month for 240 months. If the aggravating Sallie Mae/Navient rep from the frustrating phone call is correct, then I’ll have Sallie Mae/Navient paid off in eighteen years. So the moot question is: would I rather keep my current plan, or should I send more money for a longer period of time? Let’s see:

consolidation: $224 x 240 months = $53,760


my current plan: $204 x 216 months = $44,064

That’s a no-brainer. Loan consolidation would actually set me back further, causing me to pay nearly $10,000 more than sticking with my current plan. Sadly, the interest that Sallie Mae will earn on my student loans would pay for a year or two of college for one of my children . . . who will probably have to get student loans, because I won’t be able to save as much for their education.

Bringing this discussion closer to home: because our per-capita incomes and cost-of-living are lower in the Deep South, being strapped with debt is even harder. We don’t earn as much money down here – Alabama’s per capita income is 83% of the national average – so a monthly payment that might be feasible by national standards can be excessive in the Deep South.  In “2015’s Best and Worst States for Student Debt,” ranks my home state of Alabama among the worst, at 44th. Sadly, that same report ranked Alabama 50th, just ahead of dead-last Mississippi, in “Highest Unemployment Rate for People Aged 25 to 34,” and our Deep Southern neighbors in Louisiana and Mississippi ranked in the dubious bottom-five for highest default rates.

According to The Institute for College Access & Success, the average Alabamian who carries student loans has a balance of $28,895. That number has a complicated context since many of the Alabamians with that much debt didn’t complete a degree. A similar page on the website gives the same average dollar-amount and ranks Alabama as the 12th worst state for student loan debt. I think about a person who owes that kind of money but only earns a pittance of salary at a low-wage job. Paying it back would be virtually impossible.

For more on how student-loan debt affects the larger economy, read “The Ripple Effects of Rising Student Debt” from the New York Times (May 24, 2014).

What have I learned from this brief foray into the satanic netherworld of the student loan industry?

Hindsight is 20/20— I should have started paying back my loans on the day I got them. I should have been sending money every month while I was working on my teaching certificate and while I was working on my master’s degree. At the time, the stash of cash to pay all-at-once tuition bills wasn’t there, but most months, I could have sent a few bucks to Sallie Mae to chip away at my loan balance. Yet, I handled it the way most people would: I didn’t have to make a payment, so I didn’t. And that interest on those unsubsidized loans was accruing the whole time . . . It will be a very expensive err in judgment. I’ll know how expensive when I’m nearly sixty.

All said and done, I’d be better off without my master’s degree, because the bump-up in teacher pay multiplied by the number of years I’ll earn that bump-up won’t be worth what I’ll spend (principle and interest) to have the degree. In short, unless I get another higher-paying job that requires a master’s, I’d be better off if I were less educated.

I’ve also learned that two “pro-business” Republican presidents, Nixon and Dubya, took a good government program and turned it into a for-profit system. When ordinary people like me see a government program that provides low-interest education loans, we assume that we are entering into an agreement with an institution that serves the public good. Not so. These companies are earning billions of dollars on the backs of hard-working people who try to better themselves. Unless a grantee is able to pay back the loans quickly, accepting student loans is making a deal with the Devil.

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