As J.C. Flowers and Sallie Mae Jockey to See who Can Make the Most off of Students… Students Launch Get Smart About Sallie Mae Bus Tour to Spotlight High Student Loan Rates, the Buyout, and Legislation in Congress

Business Wire, Sept 12, 2007

WASHINGTON -- As J.C. Flowers and Sallie Mae executives jockey over the fate of the $26 billion dollar buy-out, students and workers will hit the road to deliver a stark warning message to Latinos and other minority groups targeted by a Sallie Mae promotional bus tour touting their student loan vehicles: No matter what happens with the buyout of Sallie Mae, a handful of CEO's at the top will get rich while you could end up holding the bag. The alternative tour is being sponsored by SEIU, the United States Students Association and United Students Against Sweat Shops.

"The tug-of-war over the Sallie Mae deals illustrates the pitfalls of an industry where profiting off the deal trumps everything else," said Rebecca Thompson, Legislative Director for the United States Student Association. "Yes, there are hundreds of millions to be made off this deal, but for a great number of people the future of our country is also at stake. This deal could be a pivotal moment of change for higher education should J.C. Flowers take their role seriously. But it could also spell disaster for millions of students who depend on student loans."

In addition to stops on college campuses, student groups, SEIU and other organizations will head back to New York City and J.C. Flowers headquarters to call on Flowers, Bank of America and JP Morgan Chase to agree to a cap on interest rates, provide additional money for debt forgiveness, provide clear and transparent information to students, and to forgo aggressive debt collection practices.

The alternative tour is intended to cast a spotlight on several key issues facing student borrowers: (Note to reporters: For a schedule of campuses where alternate information about Sallie Mae is being distributed please contact Renee Asher at 202-255-4251.)

* Confusion over Sallie Mae loan rates. Interest rates on federally backed loans are capped at 6.5 percent, however interest rates on Sallie Mae private loans are not capped and can vary dramatically. In fact, many lower income student borrowers end up paying higher interest rates simply because of their zip code.

* Anxiety about the J.C. Flowers, Bank of America and JP Morgan Chase buyout of Sallie Mae and what that could mean for interest rates, debt collection practices, and services.

* Promotional materials from banks touting special credit cards for students that do not make interest rates, late fees and other drawbacks clear.

This week, SEIU will deliver the stories to Congress and the President, in the hope that their stories about the impact of high interest loans and the prospect of crushing debt burdens will solidify support in Congress for a host of reforms -including legislation on its way to President Bush--to free up $20.9 billion for student loan grants and to reform the industry as a whole so that it is more transparent and fair to students.

Collected through "1000 Voices in 1000 Hours," a Web-based campaign at http://www.1000voicesin1000hours.org launched in July by SEIU, one of the largest unions in the country, and a coalition of student and community organizations, including United Students Against Sweatshops, United States Students Association and ACORN, the stories give a voice to middle class and low-wage workers striving to achieve the American Dream while struggling with student loan debt a platform to talk about how Sallie Mae and the current student loan industry affects their lives.

BACKGROUND:

The average cost of attending college is up an astonishing 35 percent since 2000. The cap on federally guaranteed student loans has remained stagnant, forcing many middle class and low-income students to make up the shortfall by securing loans from private lenders. As a consequence, college students borrowed $17.3 billion in private loans in 2005, an increase of 913 percent 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 students, 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 JPMorgan Chase. The deal, valued at $25 billion, illustrates how private equity buyouts are reaching into every sector of the economy, buying up larger and more complex companies for larger and larger sums of money.

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