With millions to be from Sallie Mae Buyout, SEIU, Students, to Push J.C. Flowers, big banks to Support Student Loan Rate Cut

For Immediate Release Contact: Renee Asher at 202-730-7118

Thursday, July 12, 2007



With millions to be from Sallie Mae Buyout, SEIU, Students, to Push J.C. Flowers, big banks to Support Student Loan Rate Cut



Washington, DC— A new campaign to bring the voices and stories of middle class, and low income families hard hit buy soaring education costs and high interest rates to Congress and to J.C. Flowers, Bank of America, and J.P. Morgan Chase will kick off on Monday. On Thursday, July 19, a coalition of students will lead a delegation to J.C. Flowers headquarters in New York to ask the firm to commit to implementing reform at Sallie Mae to redress past problems with transparency about loan rates and terms, unfair debt collection policies, and to commit to cap interest rates on private loans, not to engage in overly-aggressive collections practices and to set aside a portion of the fees generated from this deal to loan forgiveness for students who work in the non-profit sector after graduation.



On Monday, a coalition of student groups, the Service Employees International Union will launch 1000 Voices in 1000 Hours next week with town hall meetings, an on-line petition, and outreach on social media sites such as Facebook and MySpace to provide students and their families with information about the need for reform and a conduit to make their voices heard in Congress and with executives at J.C. Flowers, Bank of America, and J.P. Morgan Chase. (URL?) SEIU has already launched a blog www.salliemaerevelaed.blogspot.com about the deal that has called for reform and raised questions about the buyout's impact on middle class and lower income lenders.

The vote in the house yesterday to reduce student loan rates and increase funding for tuition grants comes at a time when the average cost of attending college is up an astonishing 35% since 2000—the cap on federally guaranteed student loans has remained stagnant, forcing many middle class and low-income students to make up the short fall by securing loans from private lenders. As a consequence, college students borrowed $17.3 billion in private loans in 2005, an increase of 913% from a decade ago, and the proportion of degrees earned by students from lower-middle income families is dropping. In many cases, campus-based programs to aid lower-income students are being downsized, leaving poorer students even more likely to depend on loans to finance their educations.

As Congress struggles to reform the industry so that it better serves student lenders, Sallie Mae, the nation's largest student loan provider, will be bought out by a private equity consortium that includes J.C. Flowers & Co., Friedman Fleischer & Lowe, Bank of America, and J.P. Morgan. This deal, valued at $25 billion, highlights the extent to which the buyout industry reaches into our economy . The acquisition of Sallie Mae by a private equity consortium will only exacerbate existing practices by student lenders that place profits ahead of making education accessible and affordable for young Americans.



The buyout has raised fears that the private equity consortium, led by J.C. Flowers & Co. which specializes in financial services companies, will seek to aggressively grow their student loan and debt collection businesses at the expense of student borrowers. Both businesses are fairly unregulated; and together account for over 40% of Sallie Mae's revenue.



For more information on the buyout industry go to: behindthebuyouts.org