From the good folks at Fired Up! Missouri:
According to a release from the Missouri Democratic Party:
Blunt’s Proposed Sale of MOHELA Would Cause Higher Student Loan Costs and Fewer Options for Missourians to Pay for College
The Missouri Democratic Party has learned that Gov. Matt Blunt is in secret negotiations to sell the state’s student loan program, The Missouri Higher Education Loan Authority (MOHELA), which would result in higher student loan rates and fewer options for Missouri college students and their families.The Blunt administration is planning to sell the not-for-profit MOHELA in a no-bid contract to a private for-profit company, Sallie Mae, which from 1999-2004 paid its recently retired CEO Al Lord $225 million and its current CEO Tim Fitzpatrick $145 million in total compensation.
According to an article just last month in Fortune Magazine (attached), the
company is able to pay these salaries because “Sallie uses high interest rates and fees to charge students as much as 28% annual interest on
loans.” MOHELA is a non-profit organization created by the state in 1981
and expanded in 1994 to allow Missouri college students greater access to
low-interest student loans by increasing competition. Because of its non-profit
status, extra money collected by MOHELA goes into lowering loan rates, or
forgiving student loans through special programs designed to benefit teachers,
nurses and other public service employees.MOHELA has now grown into one of the top 10 holders and servicers of student loans in America, with more than $4.5 billion in assets.Sallie Mae, the nation’s largest student loan holder and former affiliate of the Federal Government, uses the extra money it collects to reward stockholders and its executives. The company’s net income more than quadrupled between 2000 and 2004, from $465 million to $1.9 billion, according to Fortune Magazine.“While Gov. Blunt’s secret plan to sell MOHELA is great news for Sallie Mae’s stockholders and CEO, it will inevitably mean higher student loan rates for Missouri students and their families,” said Jack Cardetti, Missouri Democratic Party spokesmen. “The future of Missouri’s economy is directly tied to increasing access to higher education, but unfortunately Gov.
Blunt’s plan would make financing for college less accessible and more
expensive.”This is not the first time Sallie Mae has attempted to buy out its
competition to expand their market share. In 2004 Sallie Mae unsuccessfully
attempted to take over Pennsylvania’s student loan program, the Pennsylvania
Higher Education Assistance Agency, but was rejected by Pennsylvania state
officials fearing the impact the takeover would have on college students and
their families.The proposed sale of MOHELA is just the latest round of bad news
for Missouri college students and their families. In December, Jim Talent casts
the deciding vote in the US Senate to cut $12.7 billion in federal student loan
programs.In June 2004 Sallie Mae gave the maximum contribution of $1,200 to Matt Blunt’s gubernatorial campaign.
I'm curious about the investment bankers on both sides of this deal. The commissions are going to be HUGE!
