2U Collapse Puts Sallie Mae and SLABS Back on the Radar (Glen McGhee)

The collapse of 2U and its subsidiary edX has put Sallie Mae (SLM) on the radar.  Many of those elite brand certificate programs (under the name Harvard, MIT, Cal Berkeley) were propped up by Sallie Mae private student loans. 

When the adult learners who took these certificate courses from edX did not get better jobs that they were promised, some ended up struggling to pay their loans. Some have defaulted on their loans. And a ripple occurs.  As part of a larger edtech meltdown, and with IT jobs being lost each month, the situation promises to get worse.

As a hedge for SLM, most of these loans are processed into Student Loan Asset-Backed Securities (SLABS) and sold off as assets. Large investors, including pension programs are invested directly or indirectly in this mess.

Sallie Mae Boom and Bust 

Sallie Mae (SLM) is a private lender that has had a number of problems.  Despite being bailed out by the US government and spinning off part of itself, SLM has a poor credit rating that's bad and getting worse. 

In 1972, the Nixon administration created the Student Loan Marketing Association, or “Sallie Mae” — a government-sponsored enterprise empowered by the government to use U.S. Treasury money to buy government-backed student loans from banks. 

As a publicly traded corporation Sallie Mae has benefited from decades of close government connections.

SLM was very profitable (and very predatory to consumers) when there was little oversight, and the US economy was booming. But when the Great Recession hit in 2008, SLM had to be bailed out when the US government purchased billions of dollars in government-backed student loans. After that bailout, Sallie Mae returned to maximizing profitability.  Over the last 5 years, SLM shares have gained 144 percent in value as student borrowers have suffered.   

While the economy is doing well enough for the middle class, that could change for the worse, not just for consumers, but also Sallie Mae. 

Recent Troubles, Troubles Ahead

In July 2024, Moody's changed its outlook on SLM's long-term from stable to negative, The bond ratings were already less than stellar, a Ba1 for senior unsecured notes. Ratings for some of its Student Loan Asset-Backed Securities were downgraded in 2022. 

Help for Student Debtors

For student loan debtors, we recommend joining the Debt Collective and contacting other advocates, including the Student Borrower Protection Center and the Project on Predatory Student Lending.

Related links:

2U Suspended from NASDAQ. Help for USC and UNC Student Loan Debtors.

2U Declares Chapter 11 Bankruptcy. Will Anyone Else Name All The Elite Universities That Were Complicit?

HurricaneTWOU.com: Digital Protest Exposes Syracuse, USC, Pepperdine, and University of North Carolina in 2U edX Edugrift (2024)

2U-edX crash exposes the latest wave of edugrift (2023)

2U Virus Expands College Meltdown to Elite Universities (2019)

Buyer Beware: Servicemembers, Veterans, and Families Need to Be On Guard with College and Career Choices (2021)

College Meltdown 2.1 (2022)

EdTech Meltdown (2023)  

Erica Gallagher Speaks Out About 2U's Shady Practices at Department of Education Virtual Listening Meeting (2023)

Erica Gallagher Speaks Out About 2U's Shady Practices at Department of Education Virtual Listening Meeting

Hello, my name Erica Gallagher and I am a graduate of the University of Southern California’s online Masters of Social Work program. Or to put it more accurately, I am a graduate of 2U’s online Masters of Social Work diploma mill. 

2U is the Online Program Management or OPM company that runs USC’s online MSW program. When I decided to attend USC, I had no idea that the online MSW program was actually run by 2U.

I didn’t know that my classes were going to be taught by instructors who were hired specifically for the OPM classes, rather than USC professors, or that they would be using outdated materials to teach me.

I didn’t know that OPM employees were the ones assigning us field placements, many of which had nothing to do with our experiences.

I didn’t know that the admissions representatives and the counselors I was emailing on a day-to-day basis were actually OPM employees, and not actual USC staff. That’s because they went to great efforts to make students believe this was fully a USC program, even arming 2U employees with USC email addresses. 

If I had known, I would have never enrolled. 

From the moment I looked into the program until the moment I graduated, I was lied to. I was promised a USC education that would open doors for me, and that’s not what I got. Instead, I got a shady, but equally as expensive, version of USC’s on-campus MSW program.

It’s so important for people to realize how much this OPM model hurts students. It rewards greed and profit at the expense of a quality education. It incentivizes schools to sign up as many people as they can, charging top dollar for subpar programs, while hiding their deception and profiteering behind the nonprofit brands of well-regarded schools.





The fact that they did this with a social work program — to people who were trying to build a career motivated by helping others — adds even more insult to injury.

Having this degree was supposed to change my life, but all it has done is complicate it. All I’ve gotten with this diploma is a mountain of debt and anxiety.

Related link: 

OPMS: The Next Frontier of Predatory Practices in Higher Education  (PPSL Blog)

2U Virus Expands College Meltdown to Elite Universities  

Colleges Are Outsourcing Their Teaching Mission to For-Profit Companies. Is That A Good Thing? (Richard Fossey)

Borrower Defense Claims Surpass 750,000. Consumers Empowered. Subprime Colleges and Programs Threatened.

HurricaneTWOU.com: Digital Protest Exposes Syracuse, USC, Pepperdine, and University of North Carolina in 2U edX Edugrift

A new website to inform student consumers has popped up. It's called HurricaneTWOU.com. The website authors identify themselves as a group of former graduate students who want to warn prospective students about what's happening at brand name programs managed by 2U and edX. And they are asking existing students to take a strategic leave of absence. 

The authors also provide information on submitting borrower defense to repayment (fraud) claims to the US Department of Education to have federal student loans forgiven.

The problem is, many consumers are unaware that the brand name schools they are attending online are paying a lion's share back to an online program manager, 2U-edX.  When some consumers cannot find gainful employment after completing their programs, enough to pay off their student loans, they start digging. What they find is that the brand name schools are barely involved in the schemes, other than to take their cut. Even the instructors, poorly paid adjuncts, are employees of the online program manager.

A number of 2U-edX programs are mentioned on HurricaneTWOU.com, to include certificate and graduate degree programs at Syracuse, USC, Pepperdine, and the University of North Carolina.  The authors are organizing an effort through a number of non-violent means, including a petition to the Consumer Financial Protection Bureau. In addition, they are asking people at 2U-edX to provide information to help their cause. 

 

Related links:

2U-edX crash exposes the latest wave of edugrift 

Erica Gallagher Speaks Out About 2U's Shady Practices at Department of Education Virtual Listening Meeting

 2U Virus Expands College Meltdown to Elite Universities