Albert Lord, the chairman and past CEO of student loan leviathan Sallie Mae, is riding high these days. He holds a million shares of company stock, valued at $57.25 per share in the second week of January; he exercised options on another $15 million in the past two years. He leads a group bidding on the Washington Nationals baseball team, a power contest as much as a money one, with George Soros and Colin Powell also among the contenders. It was reported in early January that he's building his own private 18-hole golf course in suburban Maryland.

Meanwhile, Alan Collinge, a 35-year-old former aerospace engineer in Washington State, is feeling a little low. He originally borrowed $38,000 in student loans from Sallie Mae to complete three degrees at the University of Southern California. In 2001, after making about $7,000 in on-time payments, he left his gig at Caltech on the promise of a government job that evaporated after 9-11. He was underemployed for two years, making ends meet as a short-order cook in Alaska; his student loans went into default. "When I got back from Alaska, I got a bill for $85,000 and it pretty much blew me away. That's when I realized that somebody is making a lot of money around this deal." Today, Collinge owes $105,000 to the Department of Education.

Collinge believes Lord got to the top by trampling student borrowers like him. Sallie Mae has transformed over the past 10 years from a government-sponsored enterprise—or GSE—with the limited function of providing a secondary market for student loans, into a vertically integrated private corporation dominating all aspects of the student loan business, all while never losing its grip on billions in government subsidies or the federal guarantee on much of its risk. Since 1997, the volume of loans the company manages has grown from $43.7 to $107.4 billion. It owns four times as many federal student loans as the next competitor. The practices that have made fortunes for the company's executives, and fueled a 1,900 percent growth in its stock price since 1995, include increasingly cutthroat treatment of the millions of students who depend on the company to finance their education. And Collinge, as an activist with the website studentloanjustice.org, is starting to get the ear of politicians and the media.

Collinge started studentloanjustice.org in the spring of 2005. "I lose hours of sleep because of my personal situation," he says. "So I spend my time on this." He pores over SEC filings to find out how much student loan execs earn, and he reads sites like fundrace.org and opensecrets.org to find out how much they give to politicians.

For example, Sallie Mae has set aside $3.6 billion in stock options for employees since 1997. Albert Lord and Tim Fitzpatrick, the current CEO, together have received $367 million in total compensation since 1999. John Boehner, the representative from Ohio currently running for House majority leader to replace Tom DeLay, is Sallie Mae's favorite member of Congress; he has received $122,470 from the Sallie Mae PAC in the 1989–2006 election cycles.

Collinge has also raised the question of antitrust violations. As a GSE, Sallie Mae was all but immune to allegations of monopoly, since its market advantages were conferred by federal law. Today, its status has changed. "They're becoming more and more a direct competitor to the banks and others," says Robert Shireman, a student loan expert and director of the Project on Student Debt, an adviser to President Clinton during the creation of the direct-loan program. "There are certainly concerns over whether we are nearing an oligopoly situation. They are by far a dominant player."

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In 1999, Sallie Mae bought the nonprofit USA Group, the largest guarantee agency in the country. USA Group CEO Jim Lintzenich got $4.1 million in salary and stock options valued at $21 million, plus an "early departure" clause of $5 million if he left Sallie Mae within the year (he left within nine months). After the acquisition of USA Group, some banks called for an antitrust investigation. Members of Congress leaped to Sallie Mae's defense. "The student-loan business is very big, and while Sallie Mae is big, there are a lot of other major lenders and guarantors out there," said Senator Howard "Buck" McKeon, as reported in The Chronicle of Higher Education. The Chronicle also noted that McKeon had accepted $19,250 in contributions from both Sallie Mae and the USA Group in the 1999–2000 election cycle. At the same time, Rose DiNapoli, at the time Sallie Mae's VP in charge of lobbying, was married to Michael Sitcov, a directing attorney at the Justice Department.

Sallie Mae went on to purchase several other nonprofit and for-profit student lenders. The Pennsylvania Higher Education Assistance Agency, known nationally as American Education Services and the nation's largest nonprofit guaranty agency and loan servicer—with a $56.5 billion portfolio—spent the last year fending off its unsolicited takeover bid in the amount of $1 billion. "PHEAA is not now and never will be for sale, especially to a profit-driven corporation with a track record of overcharging borrowers, laying off workers, and gobbling-up any organization that stands between students and a quest for bigger profits," said Elinor Z. Taylor, chairman of PHEAA's board of directors, in rejecting the bid. As a protest measure, Pennsylvania representative Tim Holden, a conservative Democrat, introduced a bill at the end of the most recent congressional session that would require Sallie Mae to pay $300 million in annual fees to compensate for the 32 years of tax advantages it enjoyed as a GSE.

Collinge's most powerful ammunition is the hundreds of testimonials he has collected from student loan borrowers in distress. He shared with me the stories of a dozen whose original balance has doubled, tripled, or quadrupled. Most of them are long sagas of unemployment, medical problems, missed payments, endless paperwork, defaults, delinquency, and miscommunication. Susen Gench of New York, for example, borrowed $59,000 starting in 1982, has never gone into default but has had deferments, and has made $41,000 in payments by her own accounting (Sallie Mae says $30,000). Total debt now? $53,000.

Sofia Echegaray photo: Heather Green

In a twist, Sofia Echegaray, a 30-year-old singer-songwriter living in Austin, got into trouble for overpaying on her $35,000 in loans. Last summer, she says, "I was working a contract job and worried I was going to get laid off. So I paid $450 ahead—about a month and a half of payments." Then she got a letter saying she was actually delinquent with $60 in late fees. The customer service representatives at Sallie Mae informed her that extra payments count toward the principal, but don't cover the interest or other charges, unless you pay a whole month in advance at once.

All debtors are vulnerable to compounding interest and confusing charges if they get behind on their payments. Under federal law, student loans are supposed to be easier on borrowers than other kinds of credit. Lenders must offer deferments and forbearance, both ways to safely postpone payment if you are unemployed or go back to school. Under the law, mandatory forbearance is granted if you can demonstrate that you earn the same as the poverty line for a family of two, $1,069 a month, or if your payments exceed 20 percent of your income. Above that level, forbearance is granted at the discretion of the lender. Student loan borrowers say that these concessions are hard to wrangle from lenders, and that monthly income can be hard to establish with today's shifting, temporary employment. Most importantly, because student lenders have the full power of the federal government behind them to collect on loans, and because the loans are not dischargeable in bankruptcy, lenders are less likely to agree to a settlement below the full amount they say is owed. The charges can include late fees, penalties, interest added to the principal, and the costs of collection and litigation.

"I've made repeated offers to repay what I borrowed plus interest," says Collinge. "I begged, I pleaded. They say, no no no. You're going to pay that plus penalties, plus fees, plus the interest on these fees." The Department of Education has seized Collinge's tax refunds and is threatening to garnishee his wages. He can't find work in his chosen field because his credit rating is so poor. He can't get a credit card or a regular mortgage to buy his house. "I had to put $20,000 down on it. I got a private loan at 14 percent interest. The house was only $70,000, a total piece of crap."

Tom Joyce, a spokesperson for Sallie Mae, points out that student loan default rates remain at a record low of 4.5 percent, down from 22 percent in the early 1990s. He reviewed the data of two student loan borrowers from Collinge's site who asked to remain anonymous, but who had similar stories of large increases in balances. "I can attest that all of the actions taken on both accounts were in strict accordance with the rules set by Congress," he says.

Although Joyce talks about "borrower-friendly tools" and "default prevention," Sallie Mae has bet that extra fees from delinquent accounts will be a growing source of revenue. According to its 2004 annual report, these "debt-management revenues" increased more than 30 percent, more than any other cash stream. "We've been growing on the collections side for some time now," says Joyce. In 2004, the company purchased a majority interest in Arrow Financial Services, a major player in the collections business. The company purchases debts that have already been written off for pennies on the dollar— credit card debts, auto loans, utility bills, as well as student loans—and pursues the borrowers for a settlement through telemarketer- style phone farms. Last year, the state of Minnesota assessed a state record fine of $125,000 to Arrow for 15 violations, including an unauthorized bank withdrawal, harassing calls to debtors' employers, and attempting to employ a felon as a collector.

Arrow's website entices universities to turn over their receivables: "We understand that your institution's reputation remains linked with the loan, so we take extra care when dealing with your current and former students." When it comes to student loans, Arrow has little incentive to back down. In December, yet another federal circuit court reiterated that student loans are not dischargeable in bankruptcy, and the Supreme Court ruled in another decision that Social Security payments can be seized to pay the government back.