There's big money in America's $1.5 trillion in student loans -- and a lot of it doesn't go just to students.
Much like Wall Street, the student loan financing industry is an interlocking web of well-paid CEOs and lobbyists who move easily among the U.S. Department of Education, student loan servicing firms, and the halls of Congress.
With presidential candidates such as Sens. Bernie Sanders and Elizabeth Warren proposing student loan cancellations, student lenders and servicers are now drawn into America's political conversation. And while the servicer CEOs don't make Wall Street salaries, they still profit handsomely, while lobbyists tilt the system against borrowers who lack influential advocates.
Exhibit A: Washington insider Kathleen Smith.
The Pennsylvania Higher Education Assistance Agency, known to student borrowers as FedLoan, snagged Smith as director of federal relations in April, paying her $235,000 a year and making her the 43rd highest-paid state employee, salary data show. The highest-paid was James Grossman, the chief investment officer at the Public School Employees' Retirement System, who gets $445,948.
Smith once worked as a top official at the Education Department, staffer on the Senate committee responsible for higher education policy, and president of the powerful student-loan lobbying firm Education Finance Council. Her predecessor, Scott Miller, also was one of the top-paid state employees, earning $315,416, or almost as much as the FedLoan CEO.
FedLoan and other loan servicing firms are girding for battle over the U.S. Department of Education's next long-term contract to service student loans -- which would include fees paid to these companies for serving the loans and tracking payments, loan status, and customer service metrics.
The debt-servicing system, say critics, is gamed against student borrowers.
"The student-loan lobby claims to support students and their families," said Seth Frotman, executive director of the Student Borrower Protection Center and former top student loan official at the Consumer Financial Protection Bureau. "But the reality is that executives are profiting enormously off of a broken system that leaves so many borrowers crippled in debt. Over the decades, we've seen a revolving door of lobbyists peddle policies designed to exploit the pursuit of the American dream."
Others say a solution isn't simple because of the complexity and massive scale of student debt. Universities know that government will cover rising tuition.