Sallie Mae Pressures Employees to Oppose Student Loan Reform
3.19.10 – Student lending giant Sallie Mae has spent millions on lobbying over the last year to oppose legislation that would make college more affordable, claiming that student loan reform would take away thousands of jobs in the middle of an economic recession.
By Pedro de la Torre III and Erin Rosa
While Congress debates whether to pass student loan legislation now attached to the health care bill, the student loan industry’s claims of job losses are worth a hard look.
Wanda Delvo, a student loan representative at the Bank of North Dakota in Bismarck, N.D., works at updating loan information files on Friday, Dec. 18, 2009. Federal legislation in Congress would put the federal government in control of direct student loans to college students. (AP Photo/Dale Wetzel)
Student lending giant Sallie Mae has spent millions on lobbying over the last year to oppose legislation that would make college more affordable, claiming that student loan reform would take away thousands of jobs in the middle of an economic recession. But in at least one state, Indiana, Sallie Mae and its officials have provided seemingly differing pronouncements, in public and in private, about the impact of the legislation on jobs in the state.
While managing loan collections, two employees at the Muncie, Ind., office of Student Assistance Corporation (SAC), a Sallie Mae subsidiary, learned that they were in the middle of a political battle that pitted Sallie Mae against proponents of the Student Loan and Fiscal Responsibility Act (SAFRA). That legislation would cut subsidies for Sallie Mae and other student loan companies and use the tens of billions of dollars in savings for Pell grants and other education programs.
One former worker at SAC, who requested to remain anonymous due to a confidentiality agreement he signed with the corporation, says that he felt the company used a fear of job losses at the SAC office to pressure its workers to collect petition signatures against SAFRA.
“They made us think that our jobs were in danger as call center employees, certainly,” says the anonymous employee, who spoke with Campus Progress before he was fired in late January, “the e-mails we got were terrifying to some people.”
He says he recalls the lending giant would send out e-mails to pressure employees into collecting signatures for an anti-SAFRA campaign. “It was quite pressure-filled. They had e-mails every day on how many teams [at the company] had how many signatures, who was doing well and who wasn’t,” he says.
When asked for copies of the e-mails, the employee said that such messages were automatically erased from workplace servers every few months to save disk space. “They were playing into peoples’ fears around here,” he says. “I knew we weren’t getting the whole story, and I didn’t expect Sallie Mae to give it to us.”
David Swindle, another former Sallie Mae employee who was a manager for SAC in Muncie, also discussed efforts by management to mobilize opposition to the bill: “There was lobbying coordinated within Sallie Mae. Employees were encouraged to write against the [SAFRA] proposal. However, it was always pretty vague why people should oppose it. They said that our jobs could be in danger. That was the general line,” says Swindle, who resigned from the company to pursue a journalism career in July 2009 after more than a year at SAC.
But Swindle says that Kevin Campbell, an executive with SAC, told Swindle during a private meeting in March 2009 that no jobs would be lost at the Muncie office of SAC as a result of SAFRA. “I was told very explicitly that no, they weren’t,” Swindle says.
“I just asked point blank, ‘Are our jobs actually in danger?’” Swindle says. “He said ‘No.’”
Swindle says that Campbell was then the director of collections at SAC; now Campbell is the senior director and president of the subsidiary, confirmed by a call from Campus Progress to the Muncie office. Additionally, a promotional document on Sallie Mae’s website quotes Campbell speaking on behalf of Sallie Mae.
An e-mail sent Monday asking Campbell for comment was not returned. Campus Progress could not reach Campbell on Tuesday when calling the SAC office. Campbell also did not respond to a follow-up email sent yesterday* making him aware of the story’s press time.
Sallie Mae did not return two separate requests for comment made to the company last week, nor return follow-up calls made yesterday* informing them of this story’s deadline.
In March 2009, the same time that Swindle says Campbell assured him about jobs at the Muncie office, Sallie Mae spokesperson Martha Holler was quoted by a local newspaper, The Star Press, saying that she didn’t expect the Muncie plant to be affected by SAFRA:
Despite President Barack Obama’s intention to end government subsidies for student loan companies, a spokesman for Sallie Mae said she doesn’t expect the lender’s local office to be affected.
“Sallie Mae proudly employs more than 725 Hoosiers in Muncie,” spokesman Martha Holler told The Star Press. “Our plans there remain unchanged.”
But just a few months later, in August, Sallie Mae was cited again by The Star Press saying that the plant could be shuttered, a contradiction that the newspaper noted.
Although it’s believed that 200 of the 700 jobs at Muncie’s Sallie Mae office could be directly affected by the changes on the federal level, Sallie Mae officials have not ruled out the possibility that the entire facility could be shuttered and remaining jobs moved to Sallie Mae’s offices in Indianapolis or Fishers. […]
Sallie Mae told The Star Press in March that it didn’t expect the federal reform effort to adversely affect the lender’s operations. But in recent weeks, Sallie Mae has begun a campaign to win support for its proposed alternatives. The campaign includes Thursday’s rally in Muncie and one Friday morning in Fishers.
Using non-specific claims of job losses, Sallie Mae employees in a number of states have taken action to oppose SAFRA. Sallie Mae also endorsed campaigns launched by a public relations firm hired by the student loan industry called Protect Local Jobs, which encouraged employees to lobby against SAFRA through congressional visits on Capitol Hill, letter writing campaigns, and a media relations blitz.
SAFRA, which will be coupled with the health care bill in the reconciliation process, would eliminate the Federal Family Education Loan Program (FFEL) program, which provides subsidies and guarantees against defaults to lenders making federal student loans. Instead, under SAFRA, all federal student loans would be made via the existing Direct Loan Program (DLP) serviced by the U.S. Department of Education, which lends to students without the use of a middleman. This reform is estimated to save up to $67 billion over ten years, according to the Congressional Budget Office.
President Obama announced in February 2009 that he would ask Congress to end the FFEL program, from which Sallie Mae and other lenders had reaped large profits for decades. The House enacted the proposal as SAFRA, by a vote of 253-171, in September 2009. By then, Sallie Mae and other lenders had launched a furious lobbying campaign against the bill.
Sallie Mae provides several kinds of student loans, not just those under the FFEL program, so even if SAFRA eliminated the program, Sallie Mae would still service other private and federal student loans. “We would just be incorporated into that part of Sallie Mae,” Swindle says, recounting what he says he heard from Campbell. Sallie Mae also would continue collecting on previous FFEL loans.
Earlier analyses of Sallie Mae’s job loss claims have raised serious questions. Sallie Mae announced last August that it would be bringing back 3,400 jobs from overseas to be eligible to compete for government contracts to service loans made through the DLP, yet the company claims that switching to the program would result in 2,500 jobs lost. Other loan company lobbyists and spokespeople at lending companies have claimed that anywhere from 30,000 to 35,000 jobs would be lost in the student loan industry as a whole, but this estimate appears to count the total number of employees who work on loans in the FFEL program, rather than an actual estimate of the number of jobs that could be lost if SAFRA passes.
The industry’s job loss claims have been cited by members of Congress who have expressed concerns about SAFRA. Earlier this month, six senators—Thomas Carper (D-Del.), Blanche Lincoln (D-Ariz.), Ben Nelson (D-Neb.), Bill Nelson (D-Fla.), Mark Warner (D-Va.), and Jim Webb (D-Va.)—sent a letter to Senate Majority Leader Harry Reid urging the leadership to consider alternatives SAFRA to protect against job losses in their states.
Sen. Bayh (D-Ind.) sent a similar letter to the HELP committee last month, stating, “I do have concerns about the short-term impact reform efforts could have on employment in Indiana.” And yesterday, Bayh said, “I care about those jobs in Muncie and Fishers.”
Bayh added that if SAFRA is included in the reconciliation bill with health care, that “would weigh on my mind” in deciding how to vote.
The expressed concerns of Bayh and other senators about job losses have been a key factor in delaying Senate action on the legislation.
Due to an existing shortfall in the Pell grant program that SAFRA would make up, the failure of the bill’s passage could have dire consequences for students. To avoid deep cuts to the program Congress would have to find billions for the program by cutting other programs or resort to deficit spending. If Congress cannot find money to fund the Pell grant program elsewhere, the administration said it would be forced to cut Pell grants for half a million low- and middle-income students, and reduce grants for the other roughly 7.5 million recipients by up to 60 percent.
SAFRA supporters, including Campus Progress and the Center for American Progress also argue that, in the long-term, more jobs and economic growth will come from the Pell grant increase and the additional higher education opportunities for our workforce.
Pedro de la Torre III is a senior advocacy associate at Campus Progress. Erin Rosa is an associate editor at Campus Progress.
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