Inside Higher Ed has an article about the piece on Sallie Mae last night on 60 Minutes. It’s sort of an odd article because it seems to be defending Sallie Mae in a way; is there some advertising dollars at work here?
I saw this story on 60 Minutes last night, and on the whole, I agreed with it. The student loan business really is a no-lose proposition for Sallie Mae: if students default on a loan, the lender gets money from the “guarantor” (thus the phrase “guaranteed student loans”), meaning the bank can’t possibly lose. Further, unlike most other forms of debt, students can’t negotiate it down or erase it through bankruptcy. So it makes sense as to why Sallie Mae was described as one of the most profitable businesses in the world.
On the other hand, the students they talked to about their debt load seemed a little uneducated about the whole process. These former students expressed shock that when they borrowed $60K, it turned out that they now all of a sudden owed $100K or more. Uh… this is called interest; it’s how banks make their money and why banking is lucrative in the first place.
What was completely missing from the show was any discussion as to why students have to borrow so much money to go to college in the first place. Essentially, the state and the federal governments have steadily decreased its funding for high education over the last twenty years or so. If a young person wants to earn a college degree (and young people are repeatedly told that if they want to “get ahead” in this country, they need a college degree), then they need to find a way to pay for it. Unless Mom and Dad have the cash, they have to work; and generally, jobs delivering pizzas or waiting tables aren’t enough to pay all the bills. Thus the loans.
I would have liked to have seen a bit more in this report something about the relationship between increased student loan debt and decreased government funding for higher education. And I wouldn’t have minded some sort of discussion about priorities for spending in the U.S. For example, the “education president” is pursuing a war in Iraq that has so far cost the government about $280 billion dollars (and rising, of course). Think about the number of full-ride scholarships we could have given to students attending colleges and universities.