Sallie Mae, the student loan giant, has had no shortage of work lately. It has spent $125,500 on campaign contributions, at least $3,052,000 this year on lobbying and at least a quarter- million more on advertising against a bill in Congress, the Student Aid and Fiscal Responsibility Act (SAFRA), which would cut wasteful government subsidies to student loan companies. The $87 billion this saves would be invested in education programs, like grants for low- and middle-income students, and deficit reduction. The bill, championed in the House by Education and Labor Committee chair George Miller, follows the outlines of a proposal pushed by President Obama earlier this year. A comparable Senate bill is in the works but has yet to be introduced.
Lately, Sallie Mae executives have been paying visits to Capitol Hill to make their case against SAFRA, claiming it will mean thousands of jobs lost. They are even bringing workers from their call centers on these visits to argue that their jobs should be spared. This activity seems to be having an impact on certain members of Congress, who, with the unemployment rate being in the double digits, are sensitive to the idea of losing any more jobs in their state or district.
Every person’s job is important. There is no minimizing the loss of a job and its impact on a family, especially during the current jobless recovery.
But there is something objectionable about a company manipulating data and its own workers to preserve the corporate welfare on which it has long thrived. According to Sallie Mae’s own numbers, even if SAFRA becomes law and the subsidized Family Federal Educational Loan (FFEL) program is abolished, the company may actually end next year with nearly the same number of employees in the United States as it has now, and possibly even more.
In a recent article in the Chronicle of Higher Education, Sallie Mae representatives claim that the company will lose 30 percent of its workforce should SAFRA pass. The company employs about 8,500 people, according to the report, but it is in the process of bringing back 3,400 jobs from overseas. These 3,400 jobs are returning, at least in part, so that the company can be eligible for Department of Education contracts to service Direct Loans, federal loans made directly to students from the Department of Education under a program created in 1993. If SAFRA passes, these direct loans will replace the current system of subsidized middlemen.
30 percent cut includes 3,400 returning jobs
30 percent cut does not include 3,400 returning jobs
SLM has 8,500 US jobs
SLM has 8,500 jobs globally
I spoke with a Sallie Mae representative to figure out whether the 8,500 jobs mentioned include overseas jobs, and whether the 30 percent cut in the workforce includes the 3,400 jobs being brought back to the United States. I did not get a response; but after doing the math for each possible interpretation, one can easily see that the numbers would mean 170 net US jobs lost under the worst interpretation, and 1,870 US jobs gained under the best (assuming that the 3,400 being brought back to the United States represents all overseas jobs). However one chooses to interpret these numbers, the company’s claim that there will be a major loss of US-based jobs seem exaggerated at best.
This doesn’t mean Sallie Mae cannot and will not, in its own lingo, re-evaluate its geographical footprint. While the company will employ nearly the same number of people or more, some communities could lose entire Sallie Mae facilities. However, this is not Congress’s decision; it is Sallie Mae’s. There is no reason why employees currently handling FFEL loan origination cannot do direct loan servicing with a minimum of new training, nor any reason why the jobs returning to the United States cannot be sent to the threatened facilities.
Sallie Mae’s dubious calculations are not the only funny numbers being bandied about the halls of Congress. Lenders have also been claiming that passage of SAFRA would cost the country between 30,000 and 35,000 jobs. These numbers are frightening at first glance; but if one digs a little deeper, they mean almost nothing.
The numbers come from a survey conducted by the National Council of Higher Education Loan Programs, an association for student loan companies. Rather than indicate expected job losses, the survey reflects the number of individuals employed by FFEL organizations. No one, not even the lenders, expects that all the people currently employed by a participating lender will lose their job.
For one, not everyone who works for an organization participating in the federal student loan programs works on federal student loans: many of the organizations also offer private student loans, consulting services for schools, and other products and services. These companies will also continue to service FFEL loans they already handle. Most important, if the FFEL program is eliminated, the government will still be making federal student loans directly to students and will be contracting private loan companies like Sallie Mae to service these loans.
With more loans than ever anticipated next year, it is hard to believe that there will be massive job cuts. In fact, SAFRA will probably be a net job creator. In addition to providing more financial aid to students, the bill invests billions in school construction and modernization, grants for programs to increase college access and completion, early learning programs, community colleges, minority-serving institutions and more. These investments will save and create jobs across the country.
SAFRA is not a stimulus bill. It is not designed to alleviate unemployment in the short term. But surely it would be ironic (if not moronic) if a bill that will create jobs is shot down on the grounds of protecting employment.
Sallie Mae has proposed a number of alternatives to SAFRA. On December 3 the Congressional Budget Office evaluated the latest proposal and determined that it would save about $4 billion less than SAFRA. But Congressman Miller and Senator Tom Harkin, chair of the Senate HELP Committee, noted that the impact of the Sallie Mae proposal is reduced through a budget gimmick, and that the real loss of savings available would be in the order of $8 billion. Either way, it’s a lot of money taken away from education programs and deficit reduction. The Sallie Mae proposal also would weaken the quality of loan servicing for students: instead of competing to service direct loans, lenders would be selected by schools, not students, thus replicating the FFEL system, which has been prone to corruption and inefficiency.
With all the fearmongering coming from the lenders, it is easy to lose sight of what this debate should really be about: making sure that every child has the chance to get a good and affordable education, from kindergarten to college.
While this is a goal that cannot be accomplished with one bill, or solely by acts of Congress, the Student Aid and Fiscal Responsibility Act would take a major step in the right direction. It would do this not by increasing taxes or growing the deficit but by making the federal financial aid system work for students rather than just for student loan companies. Most of what it would eliminate from the student loan industry is not the jobs of everyday workers but the enormous windfall profits and top executive salaries taken in by Sallie Mae and a handful of other companies–privileges reaped while taxpayers have borne the actual risk of lending, and privileges maintained through years of aggressive Capitol Hill lobbying. Let’s make sure the next generation is able to get an education that will allow each person to see through the transparent mathematical errors offered by the student loan companies.
Leave a Reply
Be the First to Comment!