What does ObamaCare mean? It means a 29% slash in the workforce for student loan service provider Sallie Mae. Remember in this insane world of Democrat rule that the government takeover of student loans was part of ObamaCare, whereas reimbursing doctors for Medicare was not.
Updated March 31, 2010
Sallie Mae Blames 2,500 Layoffs on Obama’s Student Loan Overhaul
By Kelly Chernenkoff
Powerhouse student loan provider Sallie Mae says layoffs are imminent as a result of President Obama’s new student loan overhaul.
“This legislation will force Sallie Mae to reduce our 8,600-person workforce by 2,500,” Conwey Casillas, Vice President of Sallie Mae Public Affairs, said in a statement to Fox News.
Obama was at Northern Virginia Community College in Alexandria on Tuesday to sign the student loan changes into law. The new bill includes a provision for the government to begin directly lending to students, bypassing financial institutions like Sallie May that traditionally have provided the loans. Obama said that such institutions have soaked up billions in subsidies.
“Now, it probably won’t surprise you to learn that the big banks and financial institutions hired a army of lobbyists to protect the status quo,” Obama said. “In fact, Sallie Mae, America’s biggest student lender, spent more than $3 million on lobbying last year alone.”
Indeed, Sallie Mae has been outspoken in its opposition to the plan, calling it a “government takeover” just last month.
“The student loan provisions buried in the health care legislation intentionally eliminate valuable default prevention services and private sector jobs at a time when our country can least afford to lose them,” Casillas told Fox News.
Sallie Mae was trying to garner support for an alternative, which the company said was roundly rejected.
“We are profoundly disappointed that a reform plan that would have achieved more savings for students was ignored and now thousands of student loan experts will unnecessarily lose their jobs,” Casillas said.
But Obama says he’s merely looking out for those in need.
“I didn’t stand with the banks and the financial industries in this fight. That’s not why I came to Washington. And neither did any of the members of Congress who are here today,” he said. “We stood with you. We stood with America’s students. And together, we finally won that battle.”
Obama said the move will save billions, enabling his administration to use the money to improve the quality and affordability of higher education.
Sallie Mae hasn’t said exactly when jobs will start getting slashed, but the cuts “will start soon,” Casillas said.
Obama did a good job demonizing the student loan service providers (after all, demonizing is pretty much the only thing he does well), but the reality is as usual quite different than the Obama demagoguery:
From the Wall Street Journal in an article entitled, “The Quietest Trillion:
Congratulations. You’re about to own $100 billion a year in student loans“:
It’s not a popular idea on campus. Loans directly from the feds have been available for decades, but the government’s poor customer service has resulted in most borrowers choosing private lenders. This week three dozen college administrators, representing schools from Notre Dame to Nevada-Reno, signed a letter urging a longer transition period to this “public option.” The fear is that the bureaucrats will not be able to pull off a takeover in just eight months. “Any delay in getting funds to schools on behalf of students will result in our needing to find resources at a time when credit is difficult to obtain,” warns the letter.
Tough luck for the Irish. Democrats have already greased this fall’s budget reconciliation to pass all of this on a mere majority vote. They are helped by rigged government accounting that disguises the cost of making below-market loans to unemployed 18-year-olds. Democrats have claimed their plan “saves” $87 billion in mandatory spending by cutting out the private middlemen, and the Congressional Budget Office has dutifully “scored” $87 billion in mandatory “savings” (or a net of $80 billion after subtracting administrative costs).
But in a remarkable letter to Senator Judd Gregg, CBO Director Douglas Elmendorf admits that government accounting is bogus. He writes that the statutory methodology “does not include the cost to the government stemming from the risk that the cash flows may be less than the amount projected (that is, that defaults could be higher than projected).” Mr. Elmendorf further notes that the government’s accounting system is specifically skewed to make direct loans from the government appear to cost much less than guaranteed loans made by private lenders. He says the real “savings” are only $47 billion, even though, in a deception that would be criminal fraud if it weren’t mandated by Congress, the official estimate remains at $80 billion.
Even the unofficial number is dubious. The government has been claiming lower default rates than private lenders, but most government loans have been to students at four-year colleges. The private lenders have serviced a higher percentage of students at community and two-year colleges, where defaults are more common regardless of lender.
If the feds are now making and owning all such loans, expect default rates to soar. When the government hires contractors to collect on its loans, it pays them for simply calling the borrower, regardless of the result. Private lenders, on the other hand, make money from a performing loan and have a greater incentive to do careful underwriting and aggressive collection.
The government will nonetheless start spending these illusory “savings” immediately, and this spending is certain to top official estimates. The Obama plan also adds a CBO-estimated $46 billion in new spending over 10 years to enlarge Pell grants. Ominously for the federal fisc, starting in 2011 these grants will automatically rise each year by the consumer price index plus 1%. Not that students will actually benefit from this subsidy explosion. Colleges have reliably raised prices to capture every federal dollar earmaked for education financing.
Rep. John Kline (R., Minn.) decided the cost estimate for Pell grants was too low, so he asked CBO to take a second look. Along comes another enlightening letter from Mr. Elmendorf. This week he wrote that Mr. Kline is correct—it looks like they will cost another $11 billion. Unfortunately, the earlier estimate must remain the official score under budgeting rules, even though the official scorekeeper says it is wrong.
You start to see why the student loan takeover was part of ObamaCare, but the doctor fix was not: pure deceitful political cynicism of the very worst kind. ObamaCare forced the CBO to assume the deception that doctor’s Medicare reimbursements would be slashed by 21% so they could deceitfully claim that “saving” for ObamaCare. Even though Democrats will add those reimbursements back in another bill that will cost a rock bottom minimum of $200 billion. Meanwhile, they decide that student loans are very much a part of ObamaCare so that they could raid the profits – after, of course, dramatically misrepresenting what those profits actually were.
In one fell swoop, ObamaCare destroys jobs, undermines the student loan system, AND ruins our health care system.
Nice trifecta. If you’re an enemy of America.