Is Sallie Mae next for a bailout?

Student loan trouble may threaten Sallie Mae lending ability
April 17, 2008

Quote :

"WASHINGTON—Sallie Mae says it cannot write money-losing student loans indefinitely. Top executives are holding 'daily deliberations' about just how long the nation's largest student lender can afford to sacrifice its bottom line for the sake of college-bound Americans, Sallie Mae CEO Albert J. Lord said Thursday. Experts said that, unless the government intervenes or market conditions rapidly improve, Sallie Mae could have no choice but to stop writing new federally backed loans."

Quote :

"That situation has forced Sallie Mae, formally SLM Corp., to lose money on every federally backed loan it makes, testing Wall Street's patience as around 60 other companies have exited the market for those loans, either permanently or temporarily."

http://www.boston.com/business/articles/2008/04/17/student_loan_losses_put_sallie_mae_in_quandary/

10/10/2008 1:39:31 AM

Student loans have been unstable since Congress pushed through reductions in Federal subsidies back in 2007. If I remember correctly, nearly every major lender either partially or completely withdrew out of the market since the loans were no longer profitable. Combine that with a tightening credit market thanks to the current subprime mess, and you've got a complete disaster.

10/10/2008 1:54:16 AM

^ Well, yeah--your point that "nearly every major lender either partially or completely withdrew out of the market" was covered in the second excerpt in the OP.

Unstable is one thing. The question is, are they, the government and its related entities, going to do yet another massive bailout of the student-loan market?

10/10/2008 2:03:03 AM

per request

8/12/2009 9:20:59 AM

Big changes ahead for student loans
Proposed legislation would provide more federal loans to students and largely cut the private sector out of the lucrative market.

Quote :

"Private lenders are losing the battle over student loans. By this time next summer, they probably will be cut out of the lucrative student lending market, with a handful of them relegated to the role of simply servicing loans made by Uncle Sam. On July 21, the House Committee on Education and Labor began marking up a bill, introduced by Rep. George Miller, D-Calif., that seeks to eliminate government-subsidized private student lending and replace it with direct loans to students through the Department of Education."

http://tinyurl.com/mkjs22

8/12/2009 12:40:53 PM

8/12/2009 2:24:42 PM

That Sallie Mae bailout was crazy!

8/12/2009 2:32:17 PM

We should just go ahead and change the name of this forum from "The Soap Box" to "Hooksaw's News Bumps".

I think the mods would like that.

8/12/2009 2:43:52 PM

How about let's change it to idiots who avoid the topic and just attack? Do you have anything to offer other than snarky, meaningless posts?

So, all of you are totally cool with the government just taking over the entire student loan process? If that isn't the ultimate "bailout," I don't know what the hell is.

BTW, I'm simply requesting threads be bumped as news warrants--at least I'm trying to stay on top of the issues. Any of you feel free to dazzle us all with your brilliant threads and commentary--if your posts here are any indication, however, I ain't gonna hold my breath.

8/12/2009 5:14:19 PM

Quote :

"So, all of you are totally cool with the government just taking over the entire student loan process?"

Totally. If anything should be subsidized in America, it's higher education.

It's not like like the private industry does a better job than the gov't, anyways.

8/12/2009 5:18:20 PM

^ Are you stupid or something? The government subsidizes the private loans now--what we're talking about is a complete takeover, you buffoon.

Quote :

"On July 21, the House Committee on Education and Labor began marking up a bill, introduced by Rep. George Miller, D-Calif., that seeks to eliminate government-subsidized private student lending and replace it with direct loans to students through the Department of Education. 'This is the biggest change in federal loans for higher education since 1965, when the original program was created,' says Terry Hartle, senior vice president at the American Council on Education."

http://tinyurl.com/mkjs22

8/12/2009 5:24:57 PM

I thought this was already in place.

Good-- cut out the middle man. What purpose is he serving?

8/12/2009 5:30:46 PM

^ Can you fucking read, you goddamned dumbass? Here's one BIG reason--from the fucking article:

Quote :

"For schools, the legislation translates into a major overhaul of their lending programs. Only about a quarter of eligible schools participate in direct government lending. 'To implement the proposal, about 4,500 schools would have to convert lending systems,' Sallie Mae's Holler says. 'It's not like putting a different disk in their PC; the whole system has to be reworked.'"

Sweet Jesus, if you're just going to be an idiot--GTFO!

8/12/2009 5:34:23 PM

Sallie Mae gouges kids on loans. I got one freshman year and under the ill-advised direction of my mom and grandparents. I'm paying something like 12-13% on a $6300 loan. If that's the private system being subsidized by the federal government and they STILL can't make money, then they don't deserve to do business. As far as I'm concerned Sallie Mae is a piece of shit company and if they go away, I'll be shedding no tears.

8/12/2009 8:09:48 PM

^^I've never met someone with a worse case of chronic foot-in-mouth. Nothing in that quote of yours refers to the purpose of the lending companies. Do you think you're being clever?

Bumping the threads is useless without meaningful commentary, which you never offer. This is a discussion forum, not a news feed. You're like a lawyer who expects to win his case by simply bringing the evidence to the courtroom.

8/13/2009 9:10:24 AM

^ Opinions vary.

8/13/2009 3:54:36 PM

bump for hooksy

3/22/2010 7:50:51 AM

Oh my! Triumphant return nigh?

3/22/2010 7:58:45 AM

http://www.msnbc.msn.com/id/35974661/ns/politics/

Quote :

"House boosts college aid for students in need By JIM KUHNHENN Associated Press Writer updated 11:44 p.m. ET, Sun., March. 21, 2010 WASHINGTON - Riding the coattails of a historic health care vote, the House on Sunday also passed a broad reorganization of college aid that affects millions of students and moves President Barack Obama closer to winning yet another of his top domestic policies. The bill rewrites a four-decades-old student loan program, eliminating its reliance on private lenders and uses the savings to direct $36 billion in new spending to Pell Grants for students in financial need."

3/22/2010 8:03:04 AM

nice, more redistribution of wealth.

and this is coming as soon as I am graduating, so once again, I won't see a penny.

3/22/2010 9:24:30 AM

Sad. That part of the legislation is going to make the underlying problem much worse. The fact that there are already so many government-backed student loans out has caused tuition to go up year after year. This will just allow more people to borrow cheap money, except now it's all going to be government money. As usual, when Congress tries to fix something, they'll end up making the problem substantially worse.

3/22/2010 12:57:56 PM

I don't disagree with the rest of your post, but can you elaborate on this:

Quote :

"The fact that there are already so many government-backed student loans out has caused tuition to go up year after year."

3/22/2010 2:35:05 PM

With the current setup, pretty much anyone can get a loan to go to college, regardless of the cost of tuition or the estimated return on investment. If someone wants to go to Duke and get a history degree, they can get a subsidized loan and go. This would not be possible if the government weren't backing the loans.

A lot of problems come from this. The primary problem is that universities don't feel pressure to lower tuition, because they know the students can pay whatever tuition hike comes their way. For students, it's rarely a matter of what they can afford, and more of an issue of what college they can get into with their academic record. That's not how it would be in a free market. Let's pretend that Congress did the right thing for once, and removed all government subsidies from the student loan market. What would happen? How many private banks would lend a student anywhere from 20k to 100k over a 4 year period to get a liberal arts degree? Or even a computer science degree? Furthermore, how many students would get a loan if the interest rate was something like 6-10%, which it likely would be?

The result of such legislation would be a huge drop in enrollment. People would stop going to college because they couldn't afford it. Now, the first response to that would be "See, now people can't go to college, that's bad, therefore we need government funded loans again." Of course, colleges wouldn't just continue to operate in their current fashion. They'd lower tuition to get people back in the classrooms. They'd have to operate like a normal business that offers a service, which has to be priced competitively, and they'd have to offer a good value. As long as the government is subsidizing these student loans, there is going to be artificially inflated demand for a college degree, which can only cause prices to go up. Also, we don't have normal market forces working in higher education to improve quality and lower prices.

The student loan crisis is probably going to be the next one to really blow up, and I have no doubt that Washington will do the exact opposite of what needs to be done.

3/22/2010 3:07:09 PM

people not going to college because they can't afford it is a bad thing for society. I suppose if you were to paint ALL these people as idiots who don't need higher education anyway, you could argue that their lack of educational achievement is perfectly fine.

3/22/2010 3:48:36 PM

Unfortunately, our current higher education system isn't too great anyway. It would be one thing if everyone was going to college, and their degree usually led to a career. That doesn't seem to be the case these days. A bachelor's degree is basically the new high school degree. Hence the "we need market forces improving quality" bit. We also need less people going to 4 year traditional universities, because those degrees are padded with a ridiculous amount of useless bullshit, and more people going through 1-2 year vocational training/certification programs.

3/22/2010 4:01:07 PM

Quote :

"Well, we need ditch diggers too."

3/22/2010 4:31:49 PM

Let these companies die.

3/22/2010 6:00:07 PM

Quote :

"A bachelor's degree is basically the new high school degree. Hence the "we need market forces improving quality" bit."

Isn't international competition the very reason labor quality has improved?

[Edited on March 22, 2010 at 6:35 PM. Reason : ]

3/22/2010 6:35:44 PM

I'm sure labor quality has improved globally. The labor force here sucks, though, at least from a business perspective. We have minimum wage, and the cost of living is fairly high. That's why companies are outsourcing to places where they can get better labor for a lower cost. It's just a better value.

[Edited on March 22, 2010 at 6:41 PM. Reason : ]

3/22/2010 6:38:25 PM

Didn't you just imply that more degrees were being required? This will force american labor to keep up with it's international competition.

3/22/2010 7:37:11 PM

Quote :

"Well, we need ditch diggers too."

they will invent some sort of ditch engineering degree for this.

3/22/2010 8:39:05 PM

they're screwed

http://money.cnn.com/2010/03/25/news/economy/student_loans_senate/index.htm?hpt=T1

Sallie Mae is now effectively banned from doing what Sallie Mae does, lol

3/25/2010 11:16:01 PM