Do you work for Sallie Mae, Nelnet, or a student loan collection agency?

If so, I have a few questions for you about how your calls go, and what customers say to you - it's for an investigative piece I am writing. Our exchanges will remain anonymous. Please email me here: ccrynjohannsen [at] gmail [dot] com.

Lead Plaintiff SLM Ventures Files Class Action Suit Against SLM Corporation ("Sallie Mae")

Courthouse News Services reports:

A federal judge has certified a securities fraud class action against Sallie Mae, the top student loan provider in the United States.

Lead plaintiff SLM Ventures accused SLM Corp., Sallie Mae's corporate name, of telling investors it used strict underwriting standards for its loans, while weakening those standards by approving risky loans to students at for-profit schools.

The suit was filed in the Southern District Court of New York (a copy of the pdf filing is here).

What's the primary reason why the plaintiff filed suit? Sallie Mae offers federally guaranteed loans and private education loans ("PELs"). The company claimed it was adhering to, as the Courthouse News Services said above, to underwriting standards for its loans, all of its loans. In 2006, Sallie Mae's management team expanded the PEL program. As a result, the portfolio doubled, and it increased from $7 billion in PELs to over $15 billion.

The plaintiff accuses "Sallie Mae actually [of] relax[ing] its underwriting standards." In so doing, they "loaned billions of dollars to borrowers with low credit scores and other high risk borrowers who
attended part-time, correspondence, or for-profit schools [my emphasis]."

In order to hide the number of PEL loans that had were delinquent or in default, Sallie Mae moved as many of them into forbearance, which is a violation of regulations.

Albert Lord, who was a the Chairman at the time, also comes into play. In 2007, he tried to sell the company off to private equity investors. If he had succeeded, he would have received $225 million, the total amount of his stock options in the company. The deal, however, fell through.

Lord's was extremely defensive during a 2007 investors call (read the full transcript here). When discussing the expansion of PEL, he was tight-lipped and refused to answer specific questions about it. At one point he said, rather oddly, " Most of the advice I get takes the direction of playing poker and how to play poker."

But he quickly added this contradictory claim, "I think it’s important that you understand that I’m not playing poker. The board is not playing poker. We are trying to do what we’ve always done and that’s create value by running the company well."

Whatever that means . . . 

The call worsened, and Lord kept delivering bad jokes. (A word of advice to Lord: if you do quit your day job as a loan predator, don't go into stand-up comedy).

He continued with a line of dumb jokey comments."I don’t play chess. I play golf -- poorly. I don’t play the piano, but we have a piano and if you put CDs in it, it plays itself," he said.

That didn't go off well, as Lord said a few minutes later, "You guys are pretty serious today, I can see."

Again, and as the Courthouse News Service reported, he would not discuss the creditworthiness of PEL.

David Jackson, who is a contributor to Seeking Alpha, described the Q&A session as the "most remarkable" he ever experienced (see Jackson's transcription here). 

This is when Lord gets nasty. Jason Miller asks Lord several questions, and Lord essentially lets him know that it's too much. They move to the next caller who is Bill Cavalier. Cavalier begins to ask questions about securitization. Lord refuses to respond, and insists that Cavalier direct those questions to Steve McGarry (McGarry was promoted to senior vice president, investor relations in 2008).

Cavalier sounds surprised by Lord's reaction, and says, "But you’re the CEO. You’re the guy who just took over the company."

Lord replies, "Yeah, that’s exactly right. I’m the CEO. You should give Steve a call. Next question."

Apparently, that means CEOs aren't responsible for understanding the innerworkings of their companies, especially when it relates to securitizations and banking. That's obviously expecting far too much!

When the call is wrapped up, and there are no more questions, Lord says to McGarry, "How good is this? Steve, let’s go. There’s no -- no questions. Let’s get the fuck out of here [my emphasis].

Lord, like usual, was keepin' it classy. Stay tuned for updates on this case of SLM vs. SLM.

Lord: "Look, I don't f%$@*ing know! I'm just the CEO. Ask Steve. I'm going golfin' on my 18-hole golf course on my estate in Anne Arundel County. Yeah, that course was built by turning millions of Americans into indentured educated citizens . . .Oh s---t! I mean . .. just ask Steve!"

Good one!

Here's a newswire from The Onion:

"At This Point, Student Loan Collector Just Wants To Know If Area Man Okay."

Now that's funny, dark humor, but I'd expect nothing less from the Onion.

Why America Is Losing the War On Poverty

Here's a snippet from my latest article, "Why America Is Losing the War on Poverty," at The Loop21.com:

Recent figures about poverty in America paint a grim picture about the living conditions of a large majority of Americans. Not only is poverty spreading rapidly, but the chances of escaping it are becoming more difficult, if not impossible. For instance, Timothy Smeeding wrote a recent New York Times article entitled, “Living the American Dream (in Canada),” in which he stated, “Of all the consequences of rising economic inequality, none is more worrisome than the possibility that a growing gap will make it harder for children of low-income and middle-class families to climb the economic ladder.” Smeeding’s argument about children is especially troubling. In 2010 the U. S. Census reported that one  in five  children now live in poverty in the U.S. Overall, the increased number of Americans living in poverty is at an all-time high.

 Click here to read the entire article.

On a final note, I visit Linh Dinh's State of the Union on a regular basis. The photography on this site is sobering, and paints a devastating picture of how poverty is rapidly spreading across the U.S. The most recent batch of photographs were of a city I know very well: Washington, D.C. The poverty and homelessness there should make each and every politician on the Hill, and in the White House, ashamed and embarrassed. And yet, they can all so easily turn a blind eye, can't they? Perhaps that is why I am not there, because I am outraged and won't compromise when I see and know that millions of Americans are suffering, homeless, and lack proper medical care. Even worse, more Americans are slipping into poverty.

Dinh's pictures also made me recall a trip I took home from Howard University (when I worked for a publishing company, I spent quite a bit of time at Howard). It was a bright, crisp day in winter a few years ago. I had just finished up a lively conversation with an amazing professor of political science. He was an older gentleman who wore a French beret, and we discussed all kinds of things. He was particularly fond of dancing, so as we wrapped up our talk, he told me about his moves. We then said our good-byes, and I got in my car to head back to Northern Virginia where I lived at the time.

As I approached the U.S. Capitol, I was awestruck and angry. I was struck by the size and sheer beauty of the building - in my view, the Capitol is most exquisite looking on cold, sunny days. Its white marble glistened under a large, winter sun. But my admiration for such fine architectural design quickly faded, as my gaze turned away from the sparkling, mammoth structure to the street I was driving down. Poverty was everywhere. Several people were pushing grocery carts. Many of the buildings were condemned, blackened, falling apart. I recall thinking, "How dare these leaders of the 'free world' claim they are doing good things in that hallowed space! Why don't they take a closer look at the streets right outside their offices?" Oh, who am I kidding? I'm forgetting that, save for Bernie Sanders, politicians never use the 'p' word. Poor? Huh? What are you talking about? And they wouldn't dare talk about the working-poor, that army of laborers who have increased dramatically over the last decade.

If things aren't changed and bold policies aren't implemented, Detroit will soon be your backyard. That is, if it isn't already. I urge you to share Dinh's pictures with your friends and family. Actively seek out opportunities to discuss poverty, the working poor, the dreadful and ever-growing gap between the rich and the poor, and other related issues. Once we all begin to acknowledge the crisis, we can begin to discuss ways in which to solve the problem.

Photo courtesy of Messay Photography

10 Student Loan Reform Leaders: #1 President Obama, Three Others, Then . . Me?

Check out my reaction to being named a leader by OnlineCollege.org in the fight for student loan reform over at my column, "Seriously Subversive," at Hypervocal. (I'm number 5; the President is no. 1). What a day, and what a surprise! And my editor's note of congratulations - at the end of my short piece at Hyper -  made me blush! Such kindness.

Here's the full list on OnlineCollege.org's piece about student loan reformers.

It's an honor to be listed. It means a lot to me, because I've been waging this battle for many years now - and guess what? The fight continues on behalf of the indentured educated class this coming year. Much, much more needs to be done to help distressed borrowers and those who have defaulted on their loans. There is not one solution to the problem. The crisis needs a multi-solution approach, something I've shared with numerous Congressional leaders and their staffers on my many visits to DC. 

Larry Summers Opines about the Future of Education: A response

Larry Summers, former President of Harvard and former member of both the Clinton and Obama Administrations has told us his thoughts on education in a recent article in the New York Times.

http://www.nytimes.com/2012/01/22/education/edlife/the-21st-century-education.html?pagewanted=2&_r=2&hpw

Let’s look at what he has to say about the future of education. He makes six points. I will consider them one by one.

1. Education will be more about how to process and use information and less about imparting it. 

The naivete of this statement coming from a former President of Harvard is astounding. How exactly, Professor Summers do you expect that that this will happen? Will professors suddenly stop lecturing? Will classrooms cease to hold hundreds of students? Will Harvard no longer offer courses that are ‘Introduction to Whatever?” Will students no longer accumulate credits in order to graduate? Because if none of those things change, Harvard will continue to be about imparting information. Professors like to lecture. One of the primary reasons they like lecturing is that it requires very little effort and they can spend most of their time on research. Unless Harvard decides to no longer value research as its top priority in the hiring of faculty the incentives will not change. If the incentives for faculty do not change, students will continue to be treated like bodies in the seats in all but the most advanced classes, And, as any professor or can tell you, that means talking at them. 

Further, you are assuming that faculty actually know how to use the information they teach. Unless faculty spend serious amounts of time as practitioners in the real world, which the vast majority of them do not, the actual use of what is done with the information they have taught is typically unknown to them. Ask your faculty what students do with the information they have learned at Harvard after they graduate and see if you get any realistic answers. The faculty typically doesn't know.

2. An inevitable consequence of the knowledge explosion is that tasks will be carried out with far more collaboration

I am sure that is true. Now let’s think about Harvard. The kids who get into Harvard have learned to do everything but cooperate in order to get into Harvard and in order to succeed at Harvard. They fight to be number one in their classes in high school. They kill themselves to win the SAT competition. They cram for tests night and day all through school. At Harvard cooperation isn’t quite the right description. Anyone who saw ‘The Social Network” (the movie about Facebook) got the idea what really goes on when a new project is being worked on at Harvard. And, professors don’t really like cooperation because then they can’t figure out which member of the team really deserved which grade. As long as there are grades and tests and valedictorians there won’t be much cooperation. The workplace may well need it. Harvard isn’t teaching it. Neither, I might add, is the government for which you toiled all those years. Even Obama’s cabinet, of which you were a part, couldn’t cooperate which is more or less why you are no longer part of it as I understand it.

3. New technologies will profoundly alter the way knowledge is conveyed. Electronic readers allow textbooks to be constantly revised, and to incorporate audio and visual effects. 

Wow. You are so out of touch that you don’t even realize that textbooks wouldn’t exist at all if it weren’t for the constant lobbying efforts of textbook manufacturers. Textbooks are very last century. We have them because legislators can’t and won’t stop their sale. Most faculty use them to avoid teaching. Students mostly ignore them in any case no matter how many glitzy pictures they may now have in them. 

You are right that new technologies will alter the way learning happens but not because they will alter how knowledge is conveyed. That whole idea that knowledge is conveyed is exactly the problem. Knowledge was conveyed by Monks when they were the only ones who could read, so they lectured about what they had read. The fact that faculty still do this in the modern era is ridiculous. No one can remember very much of what they heard in a lecture.

And, it isn’t the conveying of knowledge that is the issue in education in any case. Real education means helping students attain new abilities, enabling them to do new things. And, yes, new technologies can and will help that happen, but that will happen by bypassing the existing university system unless that system decides to adapt to the new technologies, an unlikely event at Harvard I would think.

4. “Active learning classrooms” — which cluster students at tables, with furniture that can be rearranged and integrated technology — help professors interact with their students through the use of media and collaborative experiences. 

Really isn’t that a nice idea?  The last two Administrations, in one of which you had plenty of opportunity to speak, has basically killed that idea and replaced it by testing testing and more testing so that no one does anything but memorize. How dare you quote ideas from cognitive science when all that has happened in the last 12 years is the ignoring of those ideas in favor of more rote learning?

5. The world is much more open, and events abroad affect the lives of Americans more than ever before.

So? Is that going to make Harvard’s Psychology department stop teaching statistics and how to run an experiment? Is that going to make Harvard’s Computer Science department stop teaching theoretical computer science? There are already plenty of study abroad programs and language courses at Harvard.

6. Courses of study will place much more emphasis on the analysis of data.

Now this is just silly. Scientists have always relied on data. Baseball owners haven’t so maybe you are right about Moneyball. You leave out the absurd use of data like the article in the Times written by Harvard Economists 

http://www.nytimes.com/roomfordebate/2012/01/16/can-a-few-years-data-reveal-bad-teachers/the-value-of-data-in-teacher-evaluations?scp=2&sq=economists%20test%20scores&st=cse

saying how testing is relevant to evaluating teachers, an article that relied on the assumption that test scores were important in the first place.

I feel obligated to say that for someone who ran a university you really don’t know much about education. I offered some years ago to help you learn about education (through a mutual friend) but you weren’t interested. Maybe you should stop writing about a subject you don’t understand and go back to economics, a subject nobody understands.

AEM In 2012!

Hey everyone, thanks for your patience while AEM was down. I was regrouping, and needed to change things a bit. Rest assured, AEM is still here and stronger than ever. I also look forward to sharing new, exciting developments that have taken place, and that will take place in the near future.

On that note, 2012 looks promising for AEM and my work as an investigative journalist. I also have a great announcement to make - it just happened this week. 

2012 will be a better year for all of us - at least that is my goal. We've all come a long way, and I am amazed at the community of student loan debtors. Each and everyone of you own this cause and have become activists. It is comforting to know that I am not on the battlefield alone. All of you are so supportive of one another and me. I know that many of you find comfort in these groups, and I appreciate hearing that feedback. Without your involvement, they would not be thriving, so please allow me to express my gratitude for your continued commitment to the cause. Indeed, the fight continues, and I am refreshed and eager to push for change more than ever!


Finally, you can read more of my work at the following outlets:

The Loop 21

-Incidentally, my latest piece there is entitled, "Why America is Losing the War on Poverty"

Hypervocal.com

Yahoo!


My work will be appearing in more outlets soon, so stay tuned for those announcements!