Early last week, Sen. Warren sent a letter to the acting director of the Federal Housing Finance Agency (FHFA), Ed DeMarco requesting information on Sallie Mae’s misuse of a line of credit it receives from the Federal Home Loan Bank (FHLB).
The $8.5 billion line of credit, which Sallie Mae is able to borrow from at an interest rate of 0.23% -0.34%, is intended to be used as a means to finance home mortgage loans thereby bolstering banking support of the housing market.? ?However, as Sen. Warren asserted in her letter,
?? (The) line of credit to Sallie Mae, a huge, highly leveraged, publically traded corporation that does not seem to originate any real estate mortgages, but that is the largest provider of student loans in the country.
?These private student loans are offered at interest rates significantly higher than the rates that Sallie Mae has to pay in order to borrow the money from the FHLB in the first place.? More specifically, according to Sallie Mae’s own website, private student loans are currently being offered at a rate of 3.17%-9.37%, an interest rate 25 to 40 times higher than the rate Sallie Mae is borrowing from the taxpayer.
Shortly after Sen. Warren sent the letter, Sallie Mae representatives quickly released a statement that
?The FHLB facility has no bearing on our private education loans or the Sallie Mae Bank cost of funds
However, according to a press release from Sen. Warren’s office, Sallie Mae’s claim ?directly contradicts language from the publicly-traded company’s recent corporate filings.?
Sallie Mae’s top brass recently met with students at their headquarters in Newark, Delaware.? During the meeting students discussed’ debt relief, interest rate reduction, and a reformed process for loan term extensions.??CEO Jack Remondi showed little sympathy for the plight of current or recent graduates present at the meeting when he said,
Today it’s a lot easier to borrow substantial funds and get yourself in trouble. But if we loan money and you don’t pay us back, how do we pay our bills?
Few are struggling harder than recent college graduates these days.? Almost immediately upon obtaining their degrees, college graduates are strapped with seemingly insurmountable debt coupled with staggering interest rates. The recent college graduate also faces the daunting task of finding a full-time job (including benefits) in a stagnant job market, further exacerbating an already difficult situation.?Student loan debt is estimated to exceed $1 trillion, $160 billion of which is?owned by Sallie Mae.?Since Congress was unable to come to an agreement to prevent student loan interest rates from doubling,?current students are likely to pay?hundreds to even thousands more in addition to the debt they have already accumulated.
Edited and published by CB
