"Neither, technically, is the post office."
Actually, the United States Postal Service is an independent agency of the US government. It isn't "owned" by anyone but rather is a "quasi-governmental agency" that is run by appointees of the president confirmed by the US Senate.
Sallie Mae, however, was never part of the government, although it was closely tied to the government for decades. Sallie Mae was started as a GSE (Government-Sponsored Enterprise) and enjoyed market advantages for many years provided by that status, mainly, the implicit guarantee of the government of its debt.
However, as I pointed out in my first post, it began the move away from GSE status in 1997 and was fully separated from its government sponsorship by 2004. Sallie Mae competes with a variety of other lenders to originate and service student loans. There are no explicit or implicit guarantees of its corporate debt. However, like all other private student loan lenders, assets accumulated through the federally-guaranteed student loan program up until the time the government took over all guaranteed student loan originations, ARE government-guaranteed assets.
Thus, having competitors, it isn't a monopoly, government-protected or otherwise.
Now, some part of Sallie Mae's portfolio was accumulated while it was still a GSE, and to a diminishing degree, it still earns income from the business it did when it was a GSE. However, as that relationship ended in 2004, the portion of its earnings attributable to that relationship decreases daily.
And of course, before the government took over all government-guaranteed and subsidized loans, Sallie Mae, like all other private student loan lenders, enjoyed the benefits of those programs, as well. But before the government takeover, I could have taken a guaranteed student loan with my own bank, if I'd wished.
"One of them has no constitutional justification."
Your argument isn't with the current Sallie Mae.
"Do you really think a bonafide private entity could afford to give you such a rate?"
Sure. My interest rate is variable, set annually, and my loan was made prior to the government takeover of student loan lending, I imagine it enjoys a federal guarantee as a result. I imagine the borrowing costs to finance an asset explicitly guaranteed by the federal government is very near the borrowing cost of the government, itself, for a similar term. Since my rate is guaranteed only for a year at a time, it seems the one-year Treasury would be the most appropriate benchmark, which closed today at 0.17%. Although my rate is currently sub-1%, it's a lot closer to 1% than to 0.17%. Good bankers can make money with a spread of a quarter-percent (or so I've been told by bankers).
Even so, current rates from Sallie Mae for student loans are:
- Variable interest rates from 2.25% APR to 9.37% APR
- Fixed interest rates from 5.74% APR to 11.85% APR
Creditworthiness factors into the actual rate a good bit, so I understand.
sitetest
Your own words sum up the situation quite nicely:
Sure. My interest rate is variable, set annually, and my loan was made prior to the government takeover of student loan lending, I imagine it enjoys a federal guarantee as a result.
Of course it does. So are your loan options better or worse since the government takeover of all student loan lending? Granted, that some private lenders are still allowed to act as agents of the government in originating and even servicing the loans. That would not, of course, include private lenders for places like Hillsdale College which eschews all government loans.
Is there anything to BO's repeated claims that the situation has substantially improved for borrowers since he cut the greedy middlemen (bankers) out of the loan picture?