Kindergarten Loans from SallieMae Are Here!
Okay, so before I say another word… the answer is no… I am not making this up. And this is absolutely not a joke. What it might be, however, is the most completely distorted topic about which it has ever been my displeasure to write.
SallieMae is now offering financing for the high costs of… kindergarten? It’s even marketing loans available for pre-K, which I’m pretty sure we used to call, “nursery school.” I never thought to ask my mother how much it cost to send me to nursery school, but if I had to venture a guess… tell you what… I’d eat both my socks right now if the answer was more than a few dollars a day.
I want you to think about the dynamics of what’s being offered here for a moment before I move on. These are loans for parents who are in agreement that it’s of real importance that their precious and above-average four and five year-olds attend the finest kindergartens money can buy. Parents willing to spend more than they can afford on a private kindergarten’s… do you even call it “tuition?”
I’ve always said that there are two subjects in this world that I don’t want to know more about: fast food and airplane maintenance. Just think about it… knowing more about fast food could not possibly be a good thing. There are going to be times when you’re going to HAVE to eat it… and it seems highly unlikely that learning more about it is going to make it more appetizing. Are you feeling me?
And as far as airplane maintenance is concerned, well… I’d just prefer to think that it’s pretty close to flawless… that they only have the best and brightest woking in the field, using only the most advanced diagnostic tools and systems. I sure as heck don’t want to find out that someone working on an airplane isn’t drug tested at least daily or that his or her last job was at Jiffy Lube… and I don’t need to hear funny stories about the time extra washers were found in someone’s pocket after they finished their shift… and the plane they were working on had already taken off. Ha ha… no thank you.
Well, you can just imagine my surprise to discover that there is now a third subject that must be added to my list of highly undesirable learning… I don’t want to know how much the finest kindergarten money can buy actually costs. Because it occurs to me that whatever the amount is, just the fact that anyone decides to finance it makes me certain of two things:
1. That it’s a whole lot… like five figures, I shudder to think… and that’s just completely f#@ked up for all sorts of reasons. And, 2. That I feel like I want to find the parents who are sending their prized snapperheads to such a school and beat the crap out of both of them. Yeah, the wives too… I’ve never hit a girl before, but I don’t give a damn in this particular instance. The betch is going down hard.
Think about this… by definition these parents, in order to be willing to take out loans to pay for private kindergarten must find the alternative horrifying. I mean, imagine if you and your spouse were so convinced of the need to send your child to one of these glorified babysitting services for the elite, that you were ready to sign your loan docs, and then you found out that the the admissions department had denied your application… or even worse, what if your loan got declined?
What would you do then? Is there even such a thing as a back-up plan for sending your kid to an elitist kindergarten? It doesn’t seem like there would be. And just imagine the horrors you would have to associate with the alternative, in order to be ready to take out a loan to send your kid to kindergarten? I imagine it would make one feel like a Christian Scientist with appendicitis.
That sort of parent, upon learning that their plan for kindergarten was not going to work out would have to be saying something like: “Oh my dear Lord in heaven… my exceptional child… my pristine angel… why now she might have to go to kindergarten… I can’t even say it without throwing up in my mouth a little bit… with your kid.” Imagine the screams… Arghhhhhhhh… and then both of these uber-yuppie-f#@k-parents just pass out right there and hit the floor hard.
We’re talking about parents that take the “fun” out of “disfunction.” The sort of parents certain to give their kids the gift that keeps on giving: emotional baggage.
So, check this out… a recent article by Soni Sangha in the New York Times quotes a couple of statistics from Pre-K Now: “More than one quarter of upper-middle-income children entering kindergarten do not know the alphabet, and almost 20 percent of middle-income children do not understand numerical sequence.”
Sonia says… “The lack of affordable pre-K means that even middle-class children lag behind their more affluent counterparts when they get to kindergarten.”
Isn’t this conflicting? It’s the first time in a long time that I can’t decide whether I want to LMAO… or go stick a fork into a high voltage outlet until I defecate in my pants right here at my desk. It’s weird… both sound like entirely appropriate responses.
Middle class kids are already lagging behind the Richey Riches… by the time they arrive at kindergarten? I’ll tell you what… if you even think for a moment that any sort of competition is going on between the 5 year-olds in your child’s kindergarten class… drop whatever you’re doing and go grab your child out of that Hitler Youth Academy in which you’re inadvertently you’ve enrolled.
In fairness to SallieMae here, the loans they’re marketing aren’t JUST for kindergarten and pre-K… they’re also available for the rest of elementary school, junior high and high school. And that’s a darn good thing, because if you have to finance your kid’s kindergarten year, I absolutely guarantee you that you’ll need to finance first, second, third, fourth, fifth and sixth grades too. And after that it’s just a fait accompli that you’ll be financing junior high and high school, right?
I mean, don’t even tell me that there are parents out there that blow their wad on kindergarten and then stand idly by while their obviously exceptional offspring go straight downhill from there. What would that sort of experience even do to a kid? How would he feel when older… what would he say, “I peaked in kindergarten?”
Okay, enough frivolity. Here’s what it says word for word on SallieMae’s Website:
“The K-12 Family Education LoanSM is the answer parents have been looking for. It’s a loan designed to help you pay for the high caliber education that private schools can offer. And it’s good for private elementary, middle or high schools — including prep school, military school, Catholic school, Montessori school, boarding school and more.”
Here are a few of the highlights:
The K-12 Family Education Loan has interest rates and fees that reward good credit.
(And you do know what goes hand-in-hand with that statement, right? Loans with interest rates and fees that reward good credit also punish bad credit, don’t they? Can’t have one without the other, can you?)
Loan fees are 0%-5%.
(Five percent “loan origination” fees? That’s more than any home loan.)
Borrow as little as $1,000 or up to the total cost of your child’s education.
(And the fact that they don’t even mention a cap there absolutely scares the crap out of me.)
Flexible repayment terms of up to 20 years are available.
(But not as much as that “benefit” scares the crap out of me.)
Apply with a cosigner and increase your chances of approval.
(Go ahead… hook your parents to this deal, great idea.)
You get life-of-loan servicing from SallieMae.
(Oh, doesn’t that sound sexy… I’ve always dreamed of having Sallie as my “loan servicer” throughout my entire life. Just shoot me now, okay?)
You get the convenience of combined billing for all of your Sallie Mae-serviced loans.
(Yeah, that is convenient all right. But you want to know what would be even more convenient that that… if I didn’t have any payments to make while my kid is still finger painting.)
The K-12 Family Education Loan can be used to fund past tuition balances.
(Great, so I can even re-fi my kid’s kindergarten in case I need cash. Cool… since I can’t use my home as an ATM, not I can use my five year-old.)
You may borrow for both tuition and other related expenses such as books, computers, and fees.
(Well, that’s a relief. What are the extras in kindergarten? Will the loan cover snack time?)
You can manage your account online 24/7.
(Just imagine… somewhere there’s a parent of a kid in elementary school who needs to manage a credit account online having to do with where their kid went to K-6.)
Sallie Mae also offers the Tutorial Financing Loan to help pay for the cost of tutoring to improve grades and performance on standardized tests.
(Financing for a tutor for your kid? Stop it, just stop it.)
Now for the juicy parts…
Interest rates range from 1-Month LIBOR + 7.00%… to 1-Month LIBOR + 11.50%.
Disbursement fees range from 0% to 3%.
LIBOR + 7.0 PERCENT? LIBOR + 11.5 PERCENT?
Great… now there’s a way to pay mini-bar prices for grade school.
The truly amazing part of all this is not so much that private school financing is available… it’s how they market and sell it… by making parents feel like they’ll be giving their children more by sending them to a private school, which is total poppycock. I knew lots of kids at private prep schools growing up and the only thing they had that was consistently better than what we had was pot. They could afford better buds than we could. Was I envious? Of course I was, but I got through it.
My point, however, is not to denigrate private schools. Personally, I think it’s a little bit like raising a kid in the back of a Bentley… you should be careful with stuff like that… but if you want to send your child to a private school… that’s your business. As long as you can afford it… WITHOUT BORROWING MONEY at LIBOR + 11.5%, that is.
If you can’t then don’t send your Little Lord Fauntleroy to private school… go public… it’s as close to free as it gets. And start saving for college and graduate school, when there will be no free alternatives and the education you’re paying for has a shot at paying you and more importantly, your child, back.
This is not a financing program that’s benefiting kids.
This is nothing but a predatory lending scheme based on marketing that plays on the emotions and insecurities of parents in order to line the pockets of banks with the proceeds of loans that cost up to 5 points to originate, can be up to $100,000 or even higher… and are made at interest rates that could be as high as 20 percent.
Parents that take on this sort of noxious financial obligation in order to send young children to school may very well dramatically alter their lives and the lives of the children… and I don’t mean for the better.
SO, HOW DID SALLIE MAE COME UP WITH THIS IDEA IN THE FIRST PLACE?
I don’t really know, but here’s how I imagine the dialog at SallieMae might have gone in advance of these K-12 loans being made available.
Join me now as we listen in on a meeting of SallieMae’s Board of Directors. As we enter the large and luxurious conference room, the company’s Executive Vice President of the Student Loan Division, Doug Pusher, is about to report on his division’s quarterly results…
Doug Pusher: “I’m happy to be able to report that we’ve exceeded The Street’s expectations once again with our student loan sales performance. As we projected, skyrocketing costs at colleges and universities all over the country have helped to make this another record breaking year.”
Doug Pusher: “Thank you, thank you… no, really… thank you. I couldn’t have done it without the help of our cousins on Wall Street whose hard work has brought more than half the states in the country to the edge of insolvency.”
Doug Pusher: “As we predicted, the first thing states have cut is funding for education, which in turn has made costs go even higher. At many state universities costs are up by 40 percent!
Doug Pusher: “The results of our subliminal messaging campaigns have been exceeding expectations was well. Our top four messages: 1. Go to college or you’ll die. 2. Kids that don’t go to college end up in prison. 3. Only drug addicts attend community colleges. 4. College matters more than your credit score. And of course, for the girls… 5. College or pregnant by 19 or 20… are all proving to resonate with the American people… awareness is up by 17 percent for this quarter alone.”
Doug Pusher: “Our latest study shows that by 2020, we will have ssaddled 67 percent of adults, age 35-54, with over $2.5 trillion in the best kind of debt the financial services industry has ever seen… the type of debt that the credit card companies can only dream of… debt guaranteed by the federal government, that cannot be discharged in bankruptcy, and that is tied to adjustable rate loans made at 7.5 percent over LIBOR! Even Fannie and Freddie can’t compete with that!”
APPLAUSE! APPLAUSE! (Everyone stands up as they clap…)
Doug Pusher: “By 2020, our study also shows, over 50 million adults in this country will be locked into making payments on our debt beyond their life expectancies!”
APPLAUSE! APPLAUSE! (They remain standing…)
Doug Pusher: “And, as far as post-graduates are concerned, our research tells us that by the time they celebrate their 30th birthdays, a full 75 percent will have FICO scores under 650, thus increasing their LIFE SCORES by $1.1 trillion.”
APPLAUSE! (One of the Board Members raises his hand, as the rest sit.)
Doug Pusher: “Yes, do you have a question?”
Board Member: “Thank you… Doug… you used the term, “LIFE SCORE… What does ‘LIFE’ stand for again?”
Doug Pusher: “No problem whatsoever… ‘LIFE’ stands for ‘Lifetime Interest & Fee Extension,’ and it’s a metric we use to calculate how much extra money we stand to make by imposing terms that ensure graduating students default on their loans within a few years of graduation so we can raise their interest rates and increase their fees. Frankly, it’s a hedge against the risk of baby-boomers-turned-grandparents paying off their grandkids’ loans with proceeds from their reverse mortgages.
APPLAUSE! The CEO of Sallie Mae holds his hand up to get the room’s attention…
SallieMae CEO: “Thank you for that presentation, I’m sure I speak for everyone when I say that you’ve done outstanding work since talking over the student loan division. As you know, I knew your father quite well… worked with him for years… ‘Douglas Senior’ we used to call him after you were born…
… damn good man, your dad. But, I don’t mind telling you, and I hope this won’t embarrass you too much, but your an even better Doug Pusher than I could have ever imagined… and please don’t forget to tell your crack support team that we recognize their dedication as well.”
SallieMae CEO: Okay, so our student loans are selling like hotcakes stuffed with heroin… our stock is up by almost 60 percent this year alone… but I didn’t get this far by being satisfied. So, the problem I’ve been struggling with is how we can do even better… loan out even more to more parents and grandparents than we do now…
Think about it… only 66 percent of kids are choosing to attend four year colleges in this country… I’m not talking about the Asians, let’s forget about them for a moment… my point is, 66 percent means 34 percent of American kids aren’t going to be saddled with tens of thousands in student loan debt and I see that as an enormous opportunity… if we can just come up with the right product… okay… is the marketing group ready to present their ideas?
Several voices at once: “Yes, we’re ready, sir.”
Another voice: “Could we dim the lights back there? Thanks…”
A woman in a dark suit steps to the podium, as the first slide clicks into place…
“Good afternoon… my name is Patricia Plague, I’m a Senior Vice President in charge of marketing… and first I just want to thank the Board for allowing us to present our work on this exciting initiative.”
She turns to look at the first slide…
Patricia Plague: “Our group recognized that the single largest opportunity for growth here at Sallie Mae would be to capture parents earlier in their lives. So, ladies and gentlemen… I give you… KINDERGARTEN LOANS.”
On the screen we see a SallieMae print advertisement. It’s a long, tall rectangle filled with blue that includes a soft-focus image of a mother and her school-aged son. Above the image is a headline and below the image a block of text and… and at the bottom, there’s a graphic encouraging parents to “APPLY TODAY!” that lists a web address.
Towards the right of the image is a boy, who appears to be about ten years old, smiling while doing what we assume is his schoolwork. His mother literally hovers above him, holding his shoulder and looking at his schoolwork approvingly. Superimposed on the boys shirt is the quote: “Give your child the gift of a private education.”
Underneath the photo are two paragraphs of text explaining that “The ideal solution for families who need additional flexibility, and that the loans can be used for tuition, room and board, books, computers, musical instruments, sports, and extracurricular activities.” After that it states that there are: “competitive interest rates” and “a payment solution that works for you.”
There is no mention about what those interest rates are, what the payments might be, nor that the terms of these loans fore most people are entirely unsustainable.
The ad reads: “Parents that love their children and care about their futures often choose to give their children the gift of a private school education because they understand how important it is in today’s world to cultivate their unique skills in a more intimate, supportive and nurturing environment. They understand that attending the right Kindergarten can dramatically increase a child’s lifetime earning potential… and that it’s the relationships we form in kindergarten that can pay off throughout our lives.
Of course, not all parents recognize the need to pay for private school, which is why this country still needs to build prisons and provide funding for condoms and Planned Parenthood.
Patricia Plague: But these parents also know that private school education only comes at a price, and quite often they wonder how they can pay for it without pulling the cash out of their mutual funds, flying coach, or letting their friends and neighbors know about their financial problems by leasing the 350 class of their Mercedes.
Patricia Plague: Well, at SallieMae… we understand what parents are up against today, and we don’t want to see you have to sacrifice anything in order to ensure your child learns how to read before the age of 12. And we’re here to help, which is why we now offer Kindergarten Loans… used to fund the Ivy Leaguers of tomorrow.
Next slide: POSITIONING – “The answer to a truly caring parents’ educational finance concerns.”
Next slide: Loans can also be used to pay for pre-K through High School, as long as it’s private. So the product will officially be branded, SallieMae’s K-12 Family Education Loans.