In the course of researching HESAA for this new blog I quickly discovered  that they have been caught red handed making millions in kick backs from Sallie Mae in return for steering students toward this for-profit lender, when they could have been sending people to the less expensive public loan program.  For some of you this is old news, but for many more I am certain this wasn’t something that you knew before you took out a NJCLASS loan.  Can it be that a corrupt organization can change it’s tune and reform itself?  Maybe, but take a walk with me down memory lane back to that far away year of 2007 when a story broke that must have sent chills up the spines of top devil executives of HESAA.

What’s that you say?  Your financial aid office didn’t tell you about HESAA’s track record of dirty dealing with Sallie Mae?  Here is text from the book The Student Loan Scam – The Most Oppressive Debt in U.S. History – and How We Can Fight Back by Alan Michael Collinge who founded StudentLoanJustice.org – a site you should check out and a book you should definitely get a copy of and read cover to cover.  (You are a student aren’t you? This is really something to study!)  The part about HESAA starts on page 75 in the chapter entitled “The Oversight Fiasco,” you’ll find this passage under the helpful heading “Collusive Relationships.”

“In 2007, in the midst of the various scandals surfacing in the student loan industry, a reporter for the Newark Star Ledger, Ana Alaya, found that the New Jersey Higher Education Student Assistance Authority (HESAA) had engaged in a contract with Sallie Mae.  The agreement was that HESAA would steer state schools to use Sallie Mae as a preferred lender and in return would receive cash payments based on the amount of loans that those schools’ students borrowed from Sallie Mae.

Over a seven-year period, HESAA received a $2.2 million payment on an annual basis–a total of more than $15 million, for promoting Sallie Mae…

…While the director of HESAA denied that the agency steered students toward any particular lender, at least one university representative confirmed that this was the case.  Dave Muha, a spokesman for Drew University stated that the university decided to exclusively market Sallie Mae loans to students. ‘We did that at the encouragement of HESAA … From our perspective, there really is no reason to question a state agency set up to serve the interests of students going to school in the state.’ Muha noted that the university was unaware that HESAA was receiving payments from Sallie Mae in return for loan volume.

Upon this discovery, HESAA immediately terminated its agreement with Sallie Mae, as well as a similar agreement the agency had struck with Nelnet, another notorious lender in the industry.”

It reads like a regular crime novel doesn’t it.  Another look at the quote from Muha above is telling “there really is no reason to question a state agency set up to serve the interests of students…”  That would be a true statement if that was indeed what HESAA was doing.  Instead of providing the most affordable options for students it was steering the sheep directly to the wolfs dinner plate. 

Reading the original story by Alaya is very instructive.  Towards the bottom of the story we learn: 

“The partnership struck in 2000, with HESAA as the designated federal guaranty agency and Sallie Mae as the student loan lender, was born at a time when private lenders were competing to join FFELP (Federal Family Education Loan Program) at participating schools.

It was at that time that HESAA pushed the public colleges and universities to participate in FFELP, which uses private lenders, rather than the Direct Loan Program, which uses the government as a lender, said Montclair State University spokeswoman Anne Frechette.”

At the conclusion of the article, Frechette then goes on to offer this rather unconvincing excuse for HESAA’s dirty deal.  “In the end, students benefit by having more choices.”  (!)

That has to be one of the most disingenuous arguments because the government Direct Loan Program has a something called a “subsidized loan” which for any readers who don’t know what that is you need to look it up asap.  It means that the government will not charge you interest while you attend classes and it is a type of loan that you will never, ever be able to borrow from HESAA. 

The Direct Loan Program also tends to have lower interest rates than private lenders which would also reduce overall debt paid over the life of the loan.  So really, “in the end” what Ms. Frechette meant to say was that students were screwed royally by having the “choice” (encouraged by HESAA and the public colleges fin aid staff) to pay more money back in loans to a corrupt private company (Sallie Mae) that paid off public officials at a corrupt state agency (HESAA.)


This collusion went on for 7 long years before HESAA was busted and ended the honeymoon with Sallie Mae. By ’07 it was too late, the damage had been done HESAA had succeeded in putting Sallie Mae in top billing over the federal Direct Loan Program which was a better deal for students. How many students in the state of NJ do you think that represents? At a minimum, hundreds of thousands of people had their lives ensnared in crushing debt while Sallie Mae executives took home monstrous rock star pay increases. How many many millions in loans does that represent?  

The article says this.  “Montclair State University … uses Sallie Mae for 99 percent of its $67 million in student loans, according to Student Marketmeasure…”  $67 million and that’s just Montclair State!  And notice how this was targeted at “public colleges” that’s where poor folk go to college (sorry Princeton,) the most likely to pay for school with loans.  Either way we are talking about hundreds and hundreds of millions in loans that got funneled to Sallie Mae through HESAA.  So now you know what HESAA has done in the recent past that may justify that feeling in your gut when you sign that piece of paper that you are making a deal with the devil.  I need a shower now.

-Mark Hesaa
Categories: Uncategorized