When the Student Loan Marketing Association was founded in 1972, it was a government-sponsored enterprise — like Fannie and Freddie.
It later became known as Sallie Mae, and by 2004 it had been completely privatized; it is now a 100 percent publicly traded company that markets and funds student loans. Getting a loan through Sallie Mae is no different than getting a loan through Bank of America or the guy at the local boxing gym with the roll of twenties and the brass knuckles.
Here’s where I have a problem: Many families and prospective borrowers I’ve spoken with don’t really understand that Sallie Mae is no longer connected with the government at all; its cousins Fannie and Freddie are, and to make things more confusing, Sallie Mae also operates a non-profit foundation also named Sallie Mae that sends buses around the country promoting college enrollment and encourages families to fill out the federal financial aid forms. Sallie Mae also sponsors state government initiatives like the Massachusetts Office of Consumer Affairs’ Project Credit Smarts.
In other words: Sallie Mae used to be a federal government sponsored entity, but now it’s a publicly traded private company that sponsors state government initiatives and an eponymous non-profit foundation that encourages people to take advantage of federal financial aid.
And it does all this while promoting incredibly toxic, variable rate student loans that often require parents as co-signers.
Consumer confusion, anyone?
Here’s the thing: Sallie Mae isn’t tied with the government anymore. There is no possible reason for it to still be called Sallie Mae other than to potentially confuse consumers.
At some time in the very distant future, Social Security might be disbanded. We can argue about whether that’s a good idea. But I think we should all be able to agree that, if that does happen, the federal government should not allow the Social Security brand to be reborn as a brand of variable annuities. That’s just obvious, and yet that’s almost exactly what’s been allowed to happen with Sallie Mae.