Hillary Rodham Clinton last week made a pitch to attract young voters with her plan to ease student loan debt, but the move glosses over her past coziness with the loan industry and the deregulation enacted under the Clinton administration in the 1990s that have contributed to today’s soaring student debt levels.
The front-runner for the Democratic presidential nomination wants to cut interest rates on student debt, which has spiked in the past decade to more than $1.2 trillion. Big banks and Sallie Mae, the student loan agency formerly run by the federal government, hold much of that debt.
As a freshman senator from New York in 2002, Mrs. Clinton was eagerly promoting Sallie Mae and its debt collectors.
Mrs. Clinton hosted a roundtable discussion to promote education and job training in February 2002 in western New York with Sallie Mae CEO Albert Lord and President Thomas Fitzpatrick, who were in the midst of aggressively expanding the agency’s already dominant position in the student loan industry as a result of privatization initiated by President Clinton.
As their agency took on more loans, Mr. Lord and Mr. Fitzpatrick received compensation worth $225 million and $245 million, respectively, from 1999 to 2004.
Sallie Mae announced in December 2001 that it was acquiring Pioneer Credit Recovery Inc., a student loan debt collection service based in Arcade, New York. As Pioneer sought to hire more workers, the company co-hosted the event with Mrs. Clinton.
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“New York needs new jobs, and Sallie Mae needs new workers,” Mrs. Clinton said at the time. “By bringing together business, education and community leaders, we can attract good companies and good jobs to western New York.”
Mr. Lord praised Mrs. Clinton at the event for her “leadership on this critical effort” to boost skills training in the region through the creation of a career assistance loan program.
“Sallie Mae is committed to growing its business in western New York,” Mr. Lord said. “To succeed, we need trained managers and dedicated employees.”
Mrs. Clinton’s ties to big banks are well-known. Federal election records show that five of Wall Street’s biggest players are among Mrs. Clinton’s top 10 campaign contributors over her career: top-ranked Citigroup ($782,327), second-ranked Goldman Sachs ($711,490), JPMorgan Chase ($620,919), Morgan Stanley ($543,065) and Lehman Brothers ($362,853).
Her ties to Wall Street came back to haunt her Thursday as Mrs. Clinton used Twitter to promote her $350 billion college-affordability proposal, which promised debt-free tuition at public schools. The campaign asked supporters to post up to three emojis to describe how they felt about Mrs. Clinton’s plan, but the solicitation sparked some sarcastic feedback.
“How does it feel that your Donors are responsible for the crippling student debt? Tell us in 3 emojis or less,” responded Douglas Roemer, @neophyte.
Another Twitter user said the institutions responsible for high student loan debt are the “same ones that pay her $300,000 for a 1hr talk #bigbanks #corruptsystem.”
A Twitter user named Ian Beyer wrote, “@HillaryClinton I paid mine off like a responsible adult. Is there an emoji for that?”
A spokesman for the Clinton campaign did not respond to requests for comment.
‘Not exactly a novel idea’
The Occupy movement, which has criticized Mrs. Clinton’s ties to Wall Street, reacted with grudging praise to her proposal for college affordability.
“Hillary Clinton’s proposal to make four-year public university education available to all Americans and eliminate college debt through a cap on tax deductions for the wealthiest is a shrewd, realistic-sounding plan that most Americans would support,” said Michael Levitin, editor of Occupy.com. “Some combination of capping tax deductions and imposing a financial transactions tax, as [Democratic presidential candidate] Bernie Sanders has envisioned, may be more ideal. But her plan cuts to the core of a concern shared by millions of Americans that student debt must be reined in — and that the wealthy should shoulder some of that burden.”
Adam Green, co-founder of the Progressive Change Campaign Committee, said Mrs. Clinton’s proposal is an example of “the way for Democrats to win in 2016 with big, bold, economic populist ideas that impact people’s lives.” He said Republican presidential candidates “deny a federal role in making college affordable.”
“Progressives have helped the Democratic Party adopt a popular and game-changing idea: debt-free college. Now the national debate has shifted from tinkering around the edges to making college debt-free for millions of Americans,” Mr. Green said.
The high load of student debt stems in part from the privatization of Sallie Mae, the Student Loan Marketing Association — the government-sponsored agency created in 1972 to provide low-cost loans to students.
Arguing that the government could save billions of dollars by providing student loans directly through the Education Department, Mr. Clinton moved in 1997 to deregulate Sallie Mae, leading to full privatization of the agency in 2004.
But the newly private company, in an effort to please shareholders, combined an expansion of its student loan portfolio with a foray into lending lines that had nothing to do with its original education mission, a Treasury Department analysis later concluded.
“That an entity left to its own devices considers its self-interest first is not exactly a novel idea,” Treasury said in a 2006 report.
Sallie Mae, which remained dominant in the student loan business, led a lobbying effort in Congress in 2005 to make private student loans nondischargeable in bankruptcies. Mrs. Clinton was the only senator who didn’t vote.
In 2006 and 2007, Sallie Mae lowered its lending standards to take on more students paying high-interest “subprime” loans in preparation to be purchased by a consortium of banks and private investors.
When the takeover of Sallie Mae failed and the economy crashed in late 2008, the company pushed many of its loans into forbearance, in which it charged unemployed debtors regular fees that were not credited to their accounts.
• David Sherfinski contributed to this report.
• Dave Boyer can be reached at dboyer@washingtontimes.com.
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