Showing posts with label nelnet. Show all posts
Showing posts with label nelnet. Show all posts

Tuesday, February 20, 2024

Capital One-Discover Merger: Another Blow to the Educated Underclass

Capital One and Discover Financial Services have publicly announced plans to merge. The deal worth a reported $35B would give this new entity greater power, competing (or colluding) on a higher level with JP Morgan Chase, Visa, and Mastercard.  

For working people who know anything about finance and debt, and have debt themselves, this should be frightening. Together, both banks hold about 400 million credit cards.  

Capital One and Discover are both banks and high-interest credit card lenders. That means they are issued cheap money from the US Federal Reserve and lend it to naive and desperate consumers. 

Discover student loans are used by college students who have used up their Pell Grants and federal loans and are working (and borrowing) to graduate or extend their education. The interest rates can exceed 12 percent.  

Nelnet is the student loan servicer for Discover private student loans, but their $10.4 Billion portfolio is for sale.

Discover also bundles student loans and sells them as securities, student loan asset-backed securities or SLABS. Institutional investors, like retirement and investment funds, buy the debt up as stable investments.  

Capital One does not have student loans, but college students use credit cards from both of these companies to make their way through school, paying the price later. 

While there may be regulatory challenges for the Capital One-Discover deal, it's not likely that the merger, or any other financial consolidation, will be prevented--no matter how onerous it is to consumers.  

Related links:

"Let's all pretend we couldn't see it coming" (The US Working-Class Depression)

One Fascism or Two?: The Reemergence of "Fascism(s)" in US Higher Education

The Student Loan Mess Updated: Debt as a Form of Social Control and Political Action

SLABS: The Soylent Green of US Higher Education