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Higher Ed Watch Exclusive: Sallie Mae’s Alternative Student Lending Plan

Sallie Mae has been busy in Washington, D.C., circulating a plan that would preserve a modified version of the Federal Family Education Loan Program (FFEL) rather than eliminate it in favor of the more taxpayer efficient Direct Loan program as President Obama has proposed. Obama dedicates his proposed savings to turning the Pell Grant program into a true entitlement for low-income students. Higher Ed Watch has obtained a copy of Sallie Mae's alternative plan (both the legislative language the company has proposed, a discussion memo about it, and a letter sent out today to schools). Sallie Mae, the leading FFEL lender, has hired two high-powered, well-connected Democratic lobbyists to pitch the plan.

According to Sallie Mae's reported estimates, the lender's plan would sacrifice approximately $17 billion in funding the Congressional Budget Office has identified as potential savings from eliminating FFEL. Under the President's proposal, that money would go to expanding Pell Grants. Under Sallie Mae's proposal it would be used, in effect, to continue the two competing loan programs.

Ultimately, the company wants to modify the bank-subsidized FFEL program that it currently dominates. It would allow lenders to use their own capital to issue federal student loans and guarantee that those loans would be sold to the Education Department within 120 days of full disbursement. The servicing rights (what regular people call billing and collections) associated with these loans would be retained by the lender or handled by one of the Department's contractors, with the added twist that the servicers would be penalized for defaulted student loans. Colleges would continue to choose which origination platform they would use to disburse the loans -- the one the government uses for Direct Lending or those of individual lenders.

Here is a breakdown of Sallie Mae's plan, with some initial explanation of why this is a good deal for the loan giant, but not worth sacrificing the $17 billion in savings. More analysis will come tomorrow.

Origination

As outlined in a three-page summary of the proposal, lenders would place federal student loans in a participation trust, in which the U.S. Secretary of Education would purchase a 100 percent interest -- for an amount equal to the principal disbursed.  Lenders would still be in charge of servicing loans placed in the trust, since the Education Department would not actually hold title to the loans. Within 120 days of a loan's final disbursement, however, the Secretary would be required to take full title of loan. In return for transferring the title, the lender would receive $75 -- the same amount currently paid by the Department for loans that are sold to it as part of the ECASLA "put option."

In this respect, the origination process as proposed by Sallie Mae is very similar to the way most lenders are currently issuing loans through ECASLA, with the small wrinkle that the Sallie Mae plan requires that loans be sold to the Department and that the sale must occur at an earlier date. (Under ECASLA, lenders have until September to decide whether or not to sell the loan.)

Payments to Lenders

The other major deviation from ECASLA is more noteworthy, because it will result in more government payments to lenders in the current financial climate.

Currently, FFEL subsidies are structured such that lenders keep a quarterly special allowance payment equal to commercial paper (CP) plus 1.19 percentage points from a borrower's interest that accumulates while he or she is enrolled in an institution of higher education. If the special allowance rate, CP plus 1.19 percentage points, is above the borrower's interest rate (6.8 percent on unsubsidized Stafford loans), then the government must pay the lender a subsidy to make up the difference. In cases where the borrower's interest rate payment is above the lenders' guaranteed rate of return, the lender must remit to the government those excess borrower payments.

The credit crunch has significantly reduced the CP rate, meaning that the special allowance rate (the lenders' guaranteed rate of return) is well below the borrower's interest rate. Thus, lenders at the moment must pay the government an amount equal to the difference between the borrower's interest rate and CP plus 1.19 percentage points. The Education Department for the last several quarters has actually been receiving quarterly payments from lenders on in-school loans.

Sallie Mae's proposal moves away from this current setup to one in which a lender would received a "spread" payment of an annualized rate 0.60 percent of the loan's principal for the time between the disbursement of the first loan payment  and its sale to the Secretary. This spread would be paid regardless of other financial circumstances, guaranteeing some compensation for lenders.

Servicing

Under the ECASLA program, the lender loses all servicing rights once a loan is sold to the Department of Education. This means it no longer receives any compensation whatsoever for that loan. That is not the case in Sallie Mae's proposal.

In its summary of the proposal, Sallie Mae says loan servicing would be handled by one of the Department contractors that are determined via competitive bidding, with an option for private lenders to retain servicing rights if they meet standards set out by the Department. The servicer for loans originated by a lender that doesn't retain servicing rights or as part of the Direct Loan program shall be selected by the borrower's institution.

Sallie Mae's proposal thus highlights why the winners of the Department's proposed servicing contract are more important than ever. Those that are selected will receive a guarantee to keep the servicing rights on all their loans, with a chance to take on the rights for even more loans. Left unsaid, of course, is that Sallie Mae is a heavy favorite to win one of these contracts.

The servicing compensation under Sallie Mae's proposal would also allow, for the first time, for servicers to receive differentiated compensation based upon a borrower's institution and type of loan taken out. In other words, servicers could receive greater compensation for loans taken out by riskier students, such as the borrowers at proprietary institutions that Sallie Mae has had exclusive arrangements with in recent years.

Default Aversion

The final component to Sallie Mae's proposal is default aversion activities. Servicers would be asked to engage in default aversion practices to help borrowers stay in repayment. If, however, the servicer is unsuccessful in its efforts within four years of a loan entering repayment (and provided it had serviced the loan for at least two consecutive years), then the servicer pays the Department a penalty equal to 3 percent of the loan's balance at the time of default. This percentage is equal to the amount that a lender currently loses on a loan if it goes into default. Starting Oct. 1, 2012, however, under current law, lenders' loss rate on a defaulted loan is supposed to increase to 5 percent. Sallie Mae's proposal thus would result in a lower loss in the future.

Here too, Sallie Mae also includes legislative language that would benefit its ability to win default aversion contracts. According to its proposed language, "the Secretary shall enter into contracts only with entities that have relevant experience and demonstrated effectiveness in loan servicing and default aversion and that meet the financial responsibility requirements proposed in regulations prescribed by the Secretary."

Competitive Bidding

An additional selling point of Sallie Mae's is the use of competitive bidding starting in 2012 to determine the fees paid to lenders for selling the loan, the spread while holding the loan, and the fees paid for servicing the loan. The actual mechanisms for this process are not outlined beyond the fact that it would occur once a year on a national basis to determine both fees simultaneously. But there's no guarantee that this proposed competitive bidding would not lead to an inefficiently high subsidy rate due to oligopolistic pricing. If Sallie Mae's proposal were implemented, there would be very little reason for any lenders besides those who won servicing contracts to stay in the program -- the compensation on the loan itself would likely not be high enough to make it work. In that case, the roughly five or so lenders that also act as servicers would likely be the only lenders submitting bids on these fees across the nation -- hardly a true representation of "the market."

A Good Deal for Sallie Mae, a Bad Deal for Taxpayers

Not surprisingly, Sallie Mae's proposal would be a great deal for the Virginia company, resulting in additional compensation to sell its loans to the Department, guaranteed servicing rights, and the ability to get paid even more for targeting loans to low-income borrowers at proprietary schools. While they may successfully be able to exploit a budget gimmick or two to make their plan seem to save almost as much as the Obama administration, don't be fooled. This plan is a good deal for Sallie Mae and other large lenders. But how about the taxpayers and students that serve to gain under the President's proposal?

Is competition among the two student loan programs which has given rise to all kinds of inefficiencies and corruption worth what is conservatively at least $17 billion in Pell Grant scholarship aid? That's the question policymakers will need to consider when they evaluate this proposal.

AttachmentSize
Sallie Mae Alternative Student Loan Proposal Summary67.4 KB
Sallie Mae Alternative Student Loan Proposal Legislative Language66.49 KB

Comments

Sallie Mae's new plan

Ben,

Your media release says the foundation received the Sallie Mae plan "hours ago," as did I. However, the release also says you have conducted "exclusive analysis" of this plan. I'm not sure what I think about their idea yet, but I wondered what kind of analysis you were able to conduct in a few hours. Were you really able to give this a thorough and objective review?

Defeat FFEL Now!

The independent lenders argue that competition is good between Direct Lending and the FFEL program. To this I also agree however competition between DL and FFELP only works if both student loan programs play by the same ethical boundaries and rules all for the benefit of the college student enrolled in their program.

If the FFEL program was really competitive with the Direct Lending program would we see a $94 billion cost savings to the taxpayer (confirmed by the US Budget Office) by using DL? I’d guess not! In addition, if the FFEL program could really stand alone on its own merit would we see Sallie Mae and the FFEL industry lobbying so heavily at Democrats catering toward their own special interests of FFEL and NOT to the interest the American taxpayer and college student? Once again, I’d guess not!

We have all seen the improprieties of the FFEL system revealed by Andrew Cuomo (Attorney General of New York) starting back in 2007. If you are not up to date regarding the unethical history of the FFEL program feel free to Google FFEL and Andrew Cuomo (or) review this internet page under "Student Loan Scandal" and you yourself can review the history of the ethical problems within the FFEL program.

I don’t know how Sallie Mae can honestly lobby for an industry where the Department of Education and the Bush Administration never provided adequate oversight in the first place. For example, many private lenders including Nelnet, Sallie Mae, and state FFEL guaranor offices (i.e. Pennslyvania Higher Education Authority (PHEAA) as one example) charged the federal government 8% in loan revenue premium but only transferred less than 2% of the credit on to the college student keeping (pocketing) the rest of the 6% government subsidy to boost their own special interest and corporate profits. In my opinion this is unethical if not darn right theft and the Department of Education under the new Obama Administration should use every legal / political opportunity to get this money back into the hands of the American taxpayer. My argument is to bring taxpayer money back under the umbrella for which it belongs with the federal government under the Direct Lending program.

In my opinion, if we are going to use taxpayer money to fund student loans I’d rather have the government collect on the subsidy rather than Nelnet, Sallie Mae, or some other FFEL provider. Maybe the government can use this interest to help pay down our growing HUGE national debit created by these same unethical student loan companies who extorted money from the American taxpayer for their own personal interests in the first place.

I was employed by a FFEL service provider for nearly 7 years and saw the abuses to the American taxpayer / government firsthand. For that very reason I voluntarily and willfully resigned from my “comfortable” position within the FFEL program and became a Certified Financial Planner® fiduciary helping parents, students, and state college / universities plan for alternative sources of college financing outside of the FFEL / Private Lending loan industry. I understand student loans are a necessity to keep our hard working students (minorities) in school; however, also I believe that my role as a fiduciary mandates supporting parents and students with the highest degree of independent ethical financial solutions available. This fiduciary role should not be taken-on by me alone but is the role of the federal government by making sure the taxpayer, parents, and students are treated ethically, fairly, and with complete transparency. As history shows the highest degree of ethical unbiased standard and fairness can only come from support of the Direct Lending program.

FFEL ? for NOW on PBS

Hi John,

I am working on a story about student lending for the show now on pbs. I was wondering if I could ask you a few questions about FFEL. If you are interested please email me asap at eisenberge@thirteen.org. Thanks.

Sallie Mae needs to die!

Sallie Mae is a corporation interested only in how they can profit. They do  not have a heart and they do not care. They have made my life and the life of others miserable because they fail to come to any sort of compromise. Now that the president will most likely shut them down,(if he has his way) they suddenly want to compromise. I have little faith in the federal government, however, I have zero faith in corporations such as Sallie Mae to do the right thing. I'd rather put my faith in the hands of the government, or at least there is a theoretical chance that we might elect people who understand that education cannot be treated as a corporation.

 Education should be obtainable for every citizen. the current system gives out student loans indiscriminately. Everyone is happy because people can go to college. However, there is just one crucial point missing. How in the world is a person supposed to pay back the student loans? While we are in school, we hope for the best. We try to prepare for the future as best we can. We try to set ourselves up to obtain a job that will provide a better life. However, what happens when entire industries are shipped overseas? What happens when you're faced with the realization that the degree was not worth the cost? Well, according to Sallie Mae you must pay back everything regardless. Regardless if it means being unable to purchase a home, regardless if it means being unable to purchase a car, regardless if it means being unable to save for retirement.

The lobbyists at Sallie Mae, as well as other lending companies, petitioned Congress to pass a law that even forbids people from including student loans in bankruptcy. Your entire world could fall apart. You could have nothing. And yet the folks from Sallie Mae will hound you until the day you die. I am not saying that people who can pay back student loans, should not pay back student loans. All I am saying is that consumer protections need to be reinstated. These consumer protections need to be reinstated retroactively. Anyone who has filed chapter 7 bankruptcy, should be allowed to amend their bankruptcy (and it should be an easy method) to include ALL student loans.

With the billions and trillions that the American taxpayer has given to banks, banks should be willing to sustain losses resulting from people who have had difficult times in life filing bankruptcy and including their student loans. Besides rethinking how we fund college in the first place, we really need to consider what bankruptcy is supposed to accomplish. I have always believed that bankruptcy is supposed to give someone a fresh start. What kind of fresh start is it when after filing bankruptcy you still might have over $100,000 in debt?

 Ages ago society decided that the minimum degree required to be a functional citizen is a high school degree. Hence, we as a society decided that up until high school would be free. Isn't it about time that we consider making at least a bachelors degree free? I hope Sallie Mae dies! I hope the goverment comes out with some sort of better  and more humane system. My understanding is that in July there will be an income based repayment option. Hopefully, this will help. However, I do hope that they do even more. I am quite certain that I am not the only one in a situation where it will be impossible, unless I win the lottery or just get lucky with a high-paying job, that will find it nearly impossible to save for a decent retirement.

Direct Loans will always triumph over FFEL b/c FFEL is dumb!

You'd think that the scholars at NAF would be compelled to take a step back and show a little humility after their ill-fated advocacy of what must now be acknowledged as the PLUS-auction boondoggle! (Conspicuously absent on the NAF blogs last week was a mea culpa for this coerced demonstration of what many already knew to be the futility of central planning!) Once again, we are confronted with the reality that Direct-Loan mania in its many incarnations, knows no loyalty to simple-economic truths, and best-business practices.

It's important to remember that the people who brought you the failure of the "market-based" PLUS auction, are the very same people who now say that Direct Loans are cheaper, more efficient, more benevolent, more effervescent...anything but FFEL! I hope for this country's sake that the pattern emerging here is clear--this isn't a lemonade stand we're talking about running folks--it's a multi-billion-dollar loan program! The smart money knows that killing FFEL won't make one ounce of difference in the affordability of college education for this country.  In fact, it'll most assuredly increase the financial burden of college education on the nation's finances. 

Payments to Lenders Decrease compared with ECASLA

The legislative language I read indicated that the US Department of Education would be the beneficial owner of the loans from the date of disbursement. That means they would get the interest payments from the borrower, not the lender.

Under the current ECASLA setup, a lender pays the difference between the borrower rate and the SAP (if lower than the borrower rate) to the US Department of Education, along with the 3M CP + 0.50% financing. Thus on an unsubsidized Stafford loan the US Department of Education gets 6.8% - (CP + 1.19%) + (CP + 0.50%) = 6.11%. On a PLUS loan the US Department of Education gets 8.5% - (CP + 1.79%) + (CP + 0.50%) = 7.21%.

Under the Sallie Mae proposal the US Department of Education gets the borrower rate minus 0.60%. So on an unsubsidized Stafford loan the US Department of Education gets 6.8% - 0.60% = 6.2%, which is higher than the 6.11% under ECASLA. Likewise on a PLUS loan the US Department of Education gets 8.5% - 0.60% = 7.9%, which is again higher than the 7.21% under ECASLA.

Note also that the duration of the payments is shorter than under ECASLA, further reducing the cost.

If a lender isn't currently participating in ECASLA the net receipts by the US Department of Education are even lower. The CP + 0.50% payments by participating lenders help defray the cost of the FFEL program.

So your statement that "it will result in more government payments to lenders in the current financial climate" is not accurate.

There are some problems with the proposal, such as the weakly competitive nature of the bidding process and the effective servicing lock, but this isn't one of them.

The revenue to the US Department of Education under this proposal appears to be greater than under the current ECASLA setup but somewhat less than under 100% Direct Lending.

Mark Kantrowitz
Publisher of FinAid.org and FastWeb.com

Response to Mark

Hi Mark,

I agree your math makes sense, but I still stand behind my original point from a cash flow perspective.

The current subsidy structure is such that with an in-school FFEL loan lenders get commercial paper plus 1.19 percentage points (1.79 percentage points for a PLUS loan, which doesn't distinguish between enrollment status). During this time, however, there are no borrower payments actually coming in on the loan (with the exception of PLUS loans where the borrower has not decided to delay payments and capitalize interest). Thus, the interest is accruing, but there is not actually a cash flow from the borrower.

The lender on the other hand, is supposed to remit the difference between the borrower interest rate and CP + 1.19. For the latest quarter this was equal to 2.58 + 1.19 = 3.77. Thus, when a loan is supposedly accruing interest of 6.8 percent from the borrower, the lender actually has to make payments to the Department of Education equal to 3.03 percent. Yes, they are "keeping" the rest of it, resulting in less going to the Department, but in this case there are not actually any payments coming in. Thus, for lenders that are short on cash, this is actually a burden for them. If you listen to some of the lender discussions of this issue they will actually complain about how they are losing money on the special allowance payment rates. That's also why they are so willing to give up those payments right now.

Now, consider the Sallie Mae proposal. In that situation, instead of receiving a payment from a lender, the federal government has to pay them an amount equal to the annualized rate of 0.60 percentage points for the time between first disbursement and loan sale. That's a payment that the government is making to a lender that they would not otherwise.

That's why we were talking about the current financial climate because as of right now, the low commercial paper rate is resulting in lender payments for in-school loans, while Sallie Mae's proposal would require payments that the Department would not otherwise have to make given current index rates.

Agreed: It is all about the cash flows

I agree that it is always all about the cash flows, but I come to a far different conclusion because I am not selectively ignoring pieces of the equation.

With ECASLA, the lenders do remit the spread between the borrower rate and SAP during the one-year participation period. But at the end of this period the US Department of Education remits back to the lender the accrued but unpaid interest on the loan when the lender exercises the put option. So my analysis is still valid when one reconciles the books at the end of the government's fiscal year.

In contrast, with the Sallie Mae proposal the lenders receive 60 basis points (annualized) during a 120-day participation period.

So there is a different duration and trajectory of cash flows in the two scenarios. However, on a net present value basis the US Department of Education pays less under the Sallie Mae proposal than under ECASLA. The nominal 77 bp average spread under ECASLA gets reduced to about 74 bp assuming a 5% discount rate, which is still greater than the 60 available under Sallie Mae's proposal. Don't forget that the Sallie Mae proposal pays the 60 bp over about a third of the time ECASLA pays its average spread. (Note also that the risk-free rate of return is currently about 0%, so one could arguably use a 0% discount rate instead of a 5% discount rate, which would increase the savings over ECASLA. I chose a 5% discount rate as reflecting a long-term average discount rate.)

Mark Kantrowitz
Publisher of FinAid.org and FastWeb.com

Should not higher education be more of a joint venture?

Hearing so many young professionals in the USA describing their problems with debts they incurred while studying, I guess that soon some of them could be suing their Alma Maters for misrepresentation or plain failure in delivering the services offered.

Perhaps the incentive structure of the education system needs to be revised so that at least some of the higher education providers offer to collect a part of their fees through a profit participation scheme, like for instance by receiving a small percentage of the student’s future earned gross income that is above the level that the student could have been estimated to earn without further education, during his first 20 years of work.

How are then the universities going to pay for their professors now? Easy, that is what the financial markets are for. These participations in the future of our youngsters could be securitized and sold in the markets, perhaps even as a good investment for a professor’s retirement fund… of course, that is if the professor delivers on his promises.

For a university to show a willingness to invest in their own students, because they are sure of what they are giving them, might be a better marketing tool than outright grants and “we invest our money in your future” is my slogan. Also, for students, the question of what university offers to invests the most present dollars against the smallest percentage of the expected future earnings... should rank among the first when selecting an Alma Mater into which to invest their own future.

When Sallie Mae says jump, elected officials ask how high

It makes me physically ill to learn that our government allows Sallie Mae to actually write the legislation that will line Sallie Mae’s own pockets. What gives Sallie Mae the right to draft legislative language?

Sallie Mae writes these bills, then tells our elected representatives how to vote on them, saying, “Don’t worry your pretty little heads by reading all this. Oh, and by the way, here’s our donation to your PAC.”

I Think the Pitchforks Should Win This One

The People don't care about percentages of profit to SallieMae. They care that this giant with absolute power:
1. is trying to call the shots (still);
2. is using The People's money to work against The People's interests;
3. is treated with deference by the statesmen they elected while The People can't get heard (and don't have enough money to get heard because they've become bankrupt for life);
4. receives no penalties for wrongdoing;
5. goes unwatched and untethered (DOE's Inspector General warned of SLM's conflicts of interest and DOE did nothing);
6. is helping to create growing toxic debt (they make money off of defaults);
7. shows no sign of actually caring about The People (they could have provided their plan a long time ago);
8. is using its absolute power to greatly profit from people who are bankrupt for life;
9. is doing deals under the table (we know they're spinning like tops); and
10. has assisted with turning The People into the new indentured servants (a source of danger for us all).

We're used to non-violent protests. I'm not sure that'll happen this time, if Sallie Mae gets its way. People are carrying pitchforks. The ones who aren't are simply uninformed about what's at stake.

What's at stake? It's not even really about the $$ savings at this point. We'd be happy with just $45 billion in savings, so long as Sallie Mae is out of the picture. They are the new AIG because of their size and reach. This plan demonstrates their reach because they are being taken very seriously by lawmakers. We want an end to the vicious cyle of increased loans and increased tuition, the absolute power, the palm greasing, the slavery. We want the mistake made by creating the FFELP fixed. People are blogging death threats. I know they mean it (and if you can conceive it, then...). The People will probably even be patient with transitional glitches under the Direct Loan Program, as threatened by Sallie Mae. It's not about the money they get from causing defaults, faking forbearance requests, and slowing down disbursements to let interest build at this point. It's about the return of American freedom. If this generation is enduring indentured servitude, the next generation will be outright slaves because of this program that isn't even working (which Sallie Mae admits!!). Before America frees any more people on foreign soil, it has to free its own people. This is a "Give Me Liberty or Give Me Death!" moment in history.

Getting rid of FFELP is just the first step in restoring America's freedom. If this step isn't even taken, if the resulting scheme looks anything like what Sallie Mae proposed, a bunch of depressed miserable people (who won't be able to send their children to college and/or save for retirement, much less buy a house or get good mental health treatment--not just antidepressants) are going to act out dangerously. It will be an "I told you so" event. Who can't see what's coming? Congress needs to be very wise at this point. The money Congress receives from Sallie Mae and its lobbyists isn't worth the danger and the misery. The hopelessness will turn equal to the hopelessness of farmers in India who killed themselves en masse because of loans they won't be able to pay back. The People are desperate now. This is a defining moment in history.

Get FFELP off the backs of students & families.

Lenders like Sallie Mae are incurable crooks. They have a good thing going and know it or wouldn’t be whining as much as they are now. Implement Direct Lending and put FFELP lenders out of their misery. No more banks preying on students on campus with credit card apps. Student Loan lenders won’t be any more helpful under FFELP than they are with recent bail out funds while starting to post record profits. Banks and lenders will exact their pounds of profit flesh one way or another. Direct Lending is the very best option for families and higher ed opportunity. While some guarantors can be helpful, not all guarantors are alike. As evidenced by one guarantor who recently tried to unsuccessfully enrich themselves by millions while leaving staff out in the cold. Implement Direct Lending and let’s move on for the maximum benefit of students and families

FFELP belongs on the historical scrapheap of bad ideas.

Everybody in the student loan business knows that Direct Lending is the best business model. Some Guarantors don’t provide the services they use to and are firing employees who now are losing their homes to foreclosure. FFELP is corrupt and always has been. Students pay too high interest rates, are preyed upon by lenders with credit cards and charges they cannot afford. If lenders ever came up with good student services like 4% interest rates on loans and no credit reporting for students who can’t manage credit cards they can’t afford then maybe FFELP would really be useful. One way or the other lenders beat up students financially. Guarantors consolidate defaulted loans for their benefit not students while stuffing their pockets with egregious compensation. Scrap FFELP like it should have been years ago. FFELP is amoral. Direct Lending and maximizing student opportunity now and for future generations is the way

RECONSOLIDATION

RECONSOLIDATION - that is all that needs to be added to any proposal and we will have competition. There is no competition in any private lender plan that does not provide for reconsolidation. The borrower/consumer is completely absent in any discussion by the private lending consortium. Only when borrowers are allowed to refinance student loans provided they can find a FFEL approved lender willing to refinance, will there ever be true competition. As it is - this is all just moving around deck chairs.

Student loans have been stripped of all competition and consumer protections. This has been, not surprisingly, left out of Sallie's discussions. Sallie Mae stock is down 90% over the past two years and 75% over the past year and Albert Lord has his salary tripled? What kind of math is that?

What Competition?

The argument of competition in this forum is a joke. The students, young and inexperienced, have to rely on the financial aid office for information on the different loans available. My school didn't give me a choice, only told me which company I would be going with. That is in spite of new laws in effect in the HEOA that say that the student is supposed to have information on all the programs available. In dealing with my loan servicing company, I have found that most of the employees are less knowledgable than me on the laws that are supposed to protect the students. Also, I get different information from the same department (different offices all over the world!) every time I call. It is a joke. Why don't we take a survey from students who actually have to use these programs to see if they are offered choices, what kinds of problems are they dealing with, instead of elitist legislature whose children don't have to use the FFEL program? I am very curious why student financial aid offices would care where the program and money comes from, unless they are still getting some kind of kickbacks like they were a few years ago. That doesn't make any sense to me. Also, in dealing with my financial aid office, I have found that they don't have any better access to the company than I do. I think the whole program is in trouble and needs a bigger look than it is currently getting.