Sallie Mae's Success Too Costly?

Does The Lender's Success Come At Too Steep A Cost To Students And Taxpayers?

(CBS)  Universities are required to pass a small portion of that money along to students in the form of cheaper fees and student grants. Republican Congressman Thomas Petri sponsored legislation to permit the direct loan program to offer similar "incentives."

"All we were asking is that the lower-cost program be allowed to compete on a more equal basis," Rep. Petri explains. "And we think the result will be that we'll save money for the taxpayer. And it will provide exactly the same benefits and a few more to students."

But, he says, Sallie Mae lobbied to get his bill killed.

"Would you say that the Sallie Mae's lobby is one of the most effective up here?" Stahl asks.

"Well, there's no question about it in the education area," the congressman replies.

Since 2002, the company and its employees have doled out more than $2.7 million to congressmen and their political action committees, including more than $200,000 to House Majority Leader John Boehner and his PAC. Over the years, Congress has written laws that give the student loan industry special advantages.

"If you don't pay Sallie Mae, then Sallie Mae gets to come after you in ways that virtually no other creditors in America can do," says Elizabeth Warren.

Asked if he ever considered going into bankruptcy, Alan Collinge says he thought about it. "But in the case of student loans, it doesn't matter because bankruptcy is not an option for the vast majority of borrowers for student loans."

"The bankruptcy laws were written, once again, to give this extraordinary protection to the student loan agencies, to Sallie Mae. The idea behind …" Warren explains.

"A special law just for them on this?" Stahl asks.

"A special law just for those who make student loans," Warren continues. "Credit card companies don't get that kind of protection despite all tier lobbying. Home mortgage lenders don't get that kind of protection."

And Congress passed more laws that squeeze the student borrowers.

"Suppose you get hurt and you have to live on disability insurance from your Social Security," Warren says.

The government can attach that. Stahl asks if there are any other cases where Social Security funds are garnished.

"Only child support," Warren replies.

But all these special protections have produced results. The default rate, over 20 percent in the late 1980s is now down below 5 percent.