Sallie Mae Increases Debt Load For Students

Remember that Sallie Mae already has an amazing deal, if students default, then the government pays it for taking such an incredible risk on providing student loans (please read-in sarcasm), then Sallie Mae hunts these same students down with aggressive debt collectors for the rest of the student's life (because they changed the law and make it incredibly difficult to discharge student loans through bankruptcy).

Now, the latest from Sallie Mae (click here for full article):

Sallie Mae, the country's largest student lender, announced yesterday that it will start charging students who apply for federally backed loans and cut the type of loans available, citing the turmoil in the credit markets as a reason for this shift.

The Reston company said in a letter to schools and universities that it would immediately stop offering loans that consolidate debt accumulated by undergraduate and graduate students.

This has traditionally represented a major part of Sallie Mae's business. The firm said it would instead concentrate solely on lending to current students.

Starting next month, Sallie Mae will charge fees -- ranging from $35 for freshmen to a few hundred dollars for graduate students -- to apply for federal loans. These fees had largely been covered by lenders in the past, but most firms are now dropping this benefit.

For more on why Sallie Mae is a horrible deal for taxpayers, check out this report from the Government Accountability Office (click here). A key finding:

"A switch to direct student loans from [Sallie Mae] guaranteed loans could save the federal government about $4.8 billion within the first five years. Adjusted to reflect loan repayments, direct loans could cost about $9.7 billion as opposed to $14.6 billion for guaranteed loans over this period. A direct loan program could achieve these savings by enabling the government to partially offset program costs with borrowers' interest payments, reducing the cost of the interest benefit, and eliminating special allowance payments. GAO did focus group interviews with financial aid administrators and school business officers from postsecondary educational institutions. These individuals had mixed views about their ability to run a direct loan program but were clearly negative about the Department of Education's ability to manage one."