Sallie Mae may throw its weight around more confidently than most because it has cultivated friends in high places. A subplot in the presidential-election crisis of 2000 that went largely unnoticed, according to Salon's Joe Conason, involved the use of corporate jets by the Bush-Cheney campaign to fly back and forth from Florida and who knows where else. Among those offering aviation services to the high cause? Enron, Halliburton, and, yes, Sallie Mae — a federally sponsored program. The State PIRGs' Higher Education Project became so alarmed by the growing presence of student-loan-industry lobbyists in Washington that it issued a report in October 2002 titled "Lending a Hand: A Report on the Lobbying Expenditures and Political Contributions of the Five Largest Student Loan Corporations." The report found that Sallie Mae (which founded its first PAC in 1998), together with its next-largest competitor, Citigroup, spent $42.9 million in lobbying over the last three election cycles, accounting for almost 90 percent of lobbying funds spent by the top five student lenders. In fact, according to the report, Sallie Mae's lobbying expenses "outpace even notorious special interest corporations"; the company spent more on lobbying in the 1998 and 2000 election cycles than RJ Reynolds Tobacco. Overall, the report concludes, "the student loan industry is making it a priority to increase its involvement in the political process," a trend that is "likely to continue as the ... 108th Congress begins the process of reauthorizing the Higher Education Act."
That promises to be something of a battle this time around. As Nassirian says, the student-loan industry "shouldn't be regulated by a bunch of education majors, but under the Department of Treasury, where they better understand banking regulations." As it stands, however, given the state of the HEA, Sallie Mae can bite at borrowers through a number of regulatory cracks.
It's ironic that President Clinton's direct-loan program, intended to introduce competition into the student-loan industry, has resulted in the rise of this "behemoth," as consumer advocates routinely refer to Sallie Mae. That's bad enough. But for young adults facing what Manning calls the "triple-witch hour of higher ed" — high student-loan and credit-card debt, and a lousy job market — putting a check on this emerging monopoly is rapidly becoming a necessity.
ALTERNATIVES TO SALLIE MAE
Many borrowers report having no difficulty — as far as they know — working with Sallie Mae. But even these borrowers often say they felt coerced into doing business with the student-loan giant, and aren't quite sure how their business ended up with the company. If you're interested in exploring alternatives, here are a few suggestions:
• If your school participates in the federal direct-student-loan program, that is by far the most convenient and cheapest way to pay for school. It also tailors repayment plans to accommodate borrowers' income levels. For more information, click here.
• Schools can participate in either the direct-loan program or the federally guaranteed student-loan program (Federal Family Education Loan Program, or FFELP), but not both. If your school participates in FFELP, however, there is one way you can get involved with the direct-loan program: through the US Department of Education's loan-consolidation program. Unlike mortgages or other forms of consumer credit, student loans can be consolidated only once. If Sallie Mae is your sole lender, which is increasingly likely as it purchases more and more loans and gets preferred status on more campuses, you will be unable to consolidate with anyone else — unless you exercise this one-time option offered by the Department of Education. For more information, go to their web site.