I stuck to discussing my vision for the book and process of recruiting writers, instead of the two essays I wrote for the book. I wanted the audience to hear from as many of us as possible. The feedback from the audience was very positive. The videos were, at most, 3minutes long, and YPFP member Oz Alturk and I enforced a 5-minute  time-limit on each speaker. Luckily I only had to cut one person off *cough* Michael, but he saw me going for the laptop to change slides. He stopped himself by the time I got there and I didn’t have to look like a moderating bully. Thank you Michael.

The presentation lasted around 45 minutes (2 minutes over my estimate), and was followed by some very interactive Q&A from the mostly full house. They must have really liked it, because we sold all of the books I had brought with us.

Amazon sales have been steady since the release.

Pictures from the event (click for larger):

https://ypfp.org/event/ypfp-dc-millennials-speak-book-release-event-world-bank

PolicyMic Article

I discuss how and when I got the idea for the book, recruiting writers via social media (crowdsourcing), and the overall intention of the project.

You can find the interview here

Growth in Median Household Income between 2000 and 2010

•  United States – 16.09%
• 5 Richest DC-area counties (plus DC) – 31.1%
• Other 5 rich counties – 17.85%

Growth in Median Family Income between 2000 and 2010

• United States – 17.43%
• 5 Richest DC-area counties (plus DC) – 30.98%
• Other 5 rich counties – 19.88%

The following graph is based on income numbers I pulled from the U.S. Census American FactFinder. It shows the differences in income and income growth between the richest counties in the United States. Specifically, it looks at the richest counties surrounding Washington, DC, compared to that of the entire United States and five of the richest U.S. counties not surrounding Washington. This article explains these numbers in full, so keep reading if you don’t want to make sense of the graph. Click graph for larger image.

In several posts I reference an April 2012 Forbes article that lists and describes the richest counties in the United States. This top 10 list contains five Washington, DC-area counties, including the top three richest on the list. I use this article not because of its academic rigor (which I will address), but because it is the top Google search return for the topic. A recent Washington Post article also addresses the issue, and has the count at 7 of the 10 richest counties.

This post will take that Forbes article a few steps further and compare the differences in median income between these 10 counties and the rest of the United States, in addition to looking at income growth over a ten year period, 2000 – 2010. All of the data that I use comes from the U.S. Census website.

Here’s the Forbes list, and the measure (median annual household income) the author (Nathan Vardi) uses to define wealth (I will explain this measure):

1. Loudon County, Virginia ($115,574)
2. Falls Church City, Virginia ($114,409)
3. Fairfax County, Virginia ($105,416.)
4. Los Alamos County, New Mexico ($103,643)
5. Howard County, Maryland($103,273)
6. Hunterdon County, New Jersey ($100,980)
7. Douglas County, Colorado ($99,198)
8. Fairfax City, Virginia ($97,900)
9. Somerset County, New Jersey ($97,440)
10. Morris County, New Jersey ($96, 747)

**Note** Skip the next few sections if you have a solid grasp on the statistics used to measure population demographics.

What the Forbes article is using to measure wealth – First, it should be clear that the Forbes article—and this post—use a median number, not an average. A median measure is the “middle score in a list of scores; it is the point at which half the scores are above and half the scores are below” (from here).

An average, or mean, is just that—the mathematical average of a group of numbers. Averages’ validity can be subject to extreme values (in our case really poor versus really rich people) and can sometimes not provide a clear description of reality. For example: would the average of 15 people living below the U.S. Poverty line averaged with 3 people worth $1million be accurate? No. With various debates regarding income equality and inequality in the United States, a more neutral approach is to use median income.

So the median value in this post takes an entire range of a number set, in this case income, and gives the number value at which half of the population (for each defined geographic region) lies on either side of the middle point. And we will be using two different median income measures—median household income and median family income. Let’s get some definitions out of the way.

Definitions from the U.S. Census:

median household income – “income of the householder and all other individuals 15 years old and over in the household, whether they are related to the householder or not”.

median family income – The total income of a family, defined by the Census as: “a family consists of two or more people (one of whom is the householder) related by birth, marriage, or adoption residing in the same housing unit.”

As you will see, the median family income is higher than households because a family—as defined by the U.S. Census above—is more likely to have a dual-income, married couple using the Census definition. If you are interested, the end of this article has a good explanation of the difference between median family and household incomes.

Now the Forbes article uses the following summary of its methods to create its list: “To determine America’s richest counties, we looked at median annual household income estimates from 2006 to 2010 in each county in the nation, provided by the U.S. Census’ American Community Survey. The estimates are in 2010 inflation-adjusted U.S. Dollars.”

You might notice that the numbers in their list—and provided earlier in this post—vary from the numbers I use. I have no idea if the article’s author(s) means he averaged the numbers from 2006 – 2010—I’m not going to the trouble to check. They should have been more clear about this. But their numbers differ from the 2010 numbers found on the Census website, which are the most up-to-date statistics publicly available. Since the Forbes crew was shady about their methods it’s almost impossible to double-check their work without guessing at how they conducted their study.

For the following graphs, I clustered the Top 10 Forbes Counties into the following groups, and averaged their income numbers:

Counties that surround Washington, DC (map). Note that I also included Arlington County because, using 2010 Census numbers, its income is actually higher than Fairfax County, which is #2 on the Forbes list. And, I included DC, because it just makes sense to use the epicenter of the region’s wealth. I’ll address any issues regarding sample-size and averaging at the end of this post.

• Loudon County, VA
• Fairfax County, VA
• Arlington County, VA
• Falls Church City, VA
• District of Columbia
• Howard County, MD

The Other Five Forbes List Counties not in the Washington, DC-area.

• Los Alamos County, NM
• Hunterdon County, NJ
• Douglas County, CO
• Somerset County, NJ
• Morris County, NJ

United States total

• Everyone in the U.S., including the residents of the above counties

Click graph for larger image.

Now the rest of this post could be spent talking about about the differences in total incomes between these counties and the U.S., but what I think is very interesting is the differences in growth between 2000 and 2010 for each cluster of counties. These growth percentages are located on the bars of the 2010 numbers, but I will list them here, just to be clear.

Growth in Median Household Income between 2000 and 2010

•  United States – 16.09%
• 5 Richest DC-area counties (plus DC) – 31.1%
• Other 5 rich counties – 17.85%

Growth in Median Family Income between 2000 and 2010

• United States – 17.43%
• 5 Richest DC-area counties (plus DC) – 30.98%
• Other 5 rich counties – 19.88%

What is interesting (to me) is that, despite their enormous wealth, the 5 richest U.S. Counties not surrounding Washington, DC grew at about the same rate as the rest of the country from 2000 – 2010. Note, when I remove Los Alamos County from the non-DC counties, their average growth rates look much for like those of the rest of the country (household income, 16.23%; family income, 18.98%). Since Los Alamos’ County’s economy is based heavily on federal spending, it resembles that of the DC-area counties, and I thought it would be of merit to take a look with it removed.

To emphasize the difference in the DC Counties’ income growth and that of the rest of the United States from 2000 – 2010, here’s another graph showing the difference.

Click graph for larger image.

Income growth for Washington, DC’s richest counties, using both measures, is about twice that of the rest of the United States, from 2000 – 2010. The next step is to dig out the 1990 numbers and look at these numbers across two decades instead of only one. But I am pretty tired of formatting graphs right now so that will have to wait for another post.

Factors influencing DC-area growth

Total federal government is probably the biggest factor in income growth for the region. The income growth rates in the (rich) DC-area counties (and Washington itself) are, again, approximately twice those for the rest of the country; the DC-area growth rates are still 10%+ higher than the non-DC rich U.S. Counties. The percentage of total federal government spending growth in the years examined here, 2000 – 2010, correspond closely to the percentage growth in median incomes in the DC area’s richest counties compared to the rest of the United States–it also (approximately) doubles:

Click graph for larger image.

Conclusion – In conclusion I conclude that if you are reading this and don’t live—or are not making plans to live—in the counties examined in this article (especially Washington) perhaps you are not interested in your income growing. If you know anyone else who likes graphs please share this post with them (copy and paste the link to Facebook, email it, or tweet it).

Statistics and More Boring Stuff

I ran these numbers through an OLS regression analysis using the extremely free R Statistics Software and was returned some awesome coefficients. Since the ACS started in 2005, I had a fairly complete dataset for each year from 2005 – 2010, including some other population statistics/variables I pulled out when collection the median income data. But, in general, all of the variables I looked at in this post, and the regression coefficients, all go up in a positive and linear fashion. So the coefficients tell us little more than a percent change does.  If you are interested in seeing these numbers, just ask. But the regular rules regarding smarminess, sass, amount of academic jargon used, and whether or not I like your tone apply and will determine whether or not you get a legitimate response from me.

As you may have read on this site, I am organizing and editing a book-length essay collection titled “Millennials Speak. Essays on the 21^st Century”. The book is composed of 23 writers spread out of over 5 continents writing about big issues from the standpoint of the Millennial Generation. We’re all pretty excited about it.

While compiling some statistics regarding global and national (US) youth unemployment for the book’s introductory essay, I ran across something called the “Millennial Jobs Report”, published by a DC-based non-profit called Generation Opportunity.

They cite a somewhat nebulous statistic regarding unemployment numbers for people who fall into the Millennial Generation in the United States (people roughly 18 – 30 years old). I’m not sure where they got their numbers since the US Department of Labor only keeps track of youth unemployment (ages 16 – 24), and then everyone over that age. There is no differentiation—for people over 24—at least for the numbers the DoL actually publishes.

There is no reference to methodology or how Generation Opportunity came up with their numbers. It looks like they blindly averaged some available numbers and passed them off as verified demographic statistics. Anyone who has taken an undergraduate-level social statistics class knows this is poor form.

I Googled high and low, searching for other mentions of their statistics, hoping to find out how they came up with them. I found some references to the numbers, but we will get to that.

First, who is Generation Opportunity? The organization consistently labels itself as a non-partisan, non-profit outfit that exists to educate the public about the hurdles facing the nation (and the Millennial Generation). I’m not so sure about all of this. Let’s take a look at three of Generation Opportunity’s employees (names withheld but available on their website) before we judge this organization according to our own personal definitions of “non-partisan”.

Their Director of National and State Policy is former Chairman of the New Jersey College Republicans and former co-chairman of the College Republican National Committee.

Their Communications Director is former Staff Lead of the National Advance Team for Rick Santorum’s failed bid for presidential nomination.

Their Senior Vice President for Communications is former Vice President for Communications and Marketing for Americans United for Life.

None of this is new information and it is publicly available via Google searches and on LinkedIn. The organization’s non-partisan credentials are shaky, at best. Still, many media outlets gobbled up their “jobs report” as fact. Below are some of these media and news outlets, with links to their stories:

Yahoo

Wall Street Journal

Huffington Post  (and this one)

Washington Examiner

Phoenix Business Journal

PolicyMic

PR Newswire

Benefits Pro

BusinessWire

KYPost

The Street

TeleTrader

SourcingKB

I had to stop around page 3 of this Google search.

All of this may come across as nerdy nitpicking (necessary when performing legitimate research), but it is another example of some large media companies with almost limitless resources accepting information at face value and passing it off as fact with little or no investigation (*cough* Manti Te’O). The fact that more than one article on the Huffington Post cites these “statistics” is laughable, considering the obvious political slant of that site’s content.

We are hoping to have it complete and ready for purchase sometime in March (paperback and eBook). Look for a Kickstarter campaign sometime in February. A few of us have been hard at work creating a great video trailer for the book.

Draft cover art by Rachel Kerwin. She did a wonderful job on the art and layout of my first novel and I am excited to be working with her on this project.

Click for full-size image

Click for full-size image.

With the debate surrounding the fiscal cliff beginning to reach a fever pitch, the size of the government, in terms of workforce and spending, will certainly be a part of whatever deal is eventually struck. But when considering size of government, what numbers do we look at to approximate the true girth of our government?

A good start, it would seem, after looking at total government spending is to look at the number of federal government employees. More government employees = bigger government, and vice versa, right? That is, if the government is growing then it will need more government employees to carry out its work, and therefore the government grows both in personnel and payroll (and benefits and operating expenses and pay raises, etc). In this article, I show that using the size of the federal workforce as an indicator of the size of the government might not tell us very much, especially with regard to size of government from a fiscal standpoint. Another place to look is the federal contracting sector.

In the 1990s, there was the reinventing government movement. Under the leadership of Al Gore, an interagency task force known as the National Partnership for Reinventing Government performed a comprehensive government review to identify opportunities and best practices for cost savings. The purpose was to streamline government, with the assumption that if government activity is outsourced to private contractors and managed as any other private sector business there will be cost efficiencies that bureaucracy is unable to create, spending will come down, and government will shrink. And, government would become more responsive since it would be easier to “fire” a contractor than a federal employee.

Outsourcing government to private contractors may have produced short-term results, as the Clinton administration left the country with a balanced national budget. But, long term, looking at the total number of federal government employees tells us very little about government growth. Especially since, for the federal contractors operating as private businesses, their long-term goals are profits. These businesses have no interest in a declining revenue stream.

In addition to shrinking the size of the federal payroll, there are political reasons to have fewer federal employees. By outsourcing federal government work and jobs to private contractors, politicians can cite a smaller number of federal employees statistic as an indicator of government contraction and thus a responsibility to taxpayers. But, the number of federal employees during the first term of the Obama administration actually decreased and the country is still running trillion dollar-plus deficits. Does this count as smaller government? Let’s take a look at some of these federal contractors and their federal contract revenue growth in the past 11 years, 2000 – 2011.

The first three contractors I chose because 90%+ of the federal contracts they receive are funneled through their DC-area headquarters. The DC-area is an interest of mine. The last one, Lockheed Martin, I included because it usually tops the list of top recipients of federal contracts. All of the numbers I used in these graphs came from www.usaspends.gov, an official U.S. Government website and database that tracks government spending.

1. Booz Allen Hamilton - From their site: “Whether ensuring citizen safety, security, and well-being or boosting our national competitiveness, Booz Allen works shoulder-to-shoulder with civilian government clients to help them deliver on their public service missions.”

From 2000 – 2011, Booz Allen Hamilton’s total federal contract dollars grew from $708million to about $4billion, an 82% increase.

2. Deloitte LLP - From their site: “Government leaders are rethinking how they tackle new and long-standing challenges—while spending less, much less. In a year marked by change and intense debate, leaders are seeking fresh perspectives and leading practices to break through and be more efficient, open, innovative, and green. That’s why government leaders turn to Deloitte. We blend public-sector experience and private-sector perspective help agencies achieve higher levels of performance, efficiency, and innovation and make a lasting impact in the U.S. and around the world.”

From 2000 – 2011 Deloitte’s total federal contract dollars grew from $99.5million to $890million, an 88% increase.

3. Chemonics International - From their Twitter page: “An international development consulting firm that promotes meaningful change to help people live healthier, more productive, and more independent lives.”

From 2000 – 2011 Chemonics’ total federal contract dollars grew from $6.8million to about $705million, a 99% increase.

4. Lockheed Martin - From their site: “Headquartered in Bethesda, MD, Lockheed Martin is a global security and aerospace company that employs about 120,000 people worldwide and is principally engaged in the research, design, development, manufacture, integration and sustainment of advanced technology systems, products and services.”

From 2000 – 2011 Lockheed Martin’s total federal contract dollars grew from $17billion to about $40billion, a 57% increase.

So government is being reinvented. Is it getting cheaper as a result? In a 2011 Project on Government Oversight (POGO) report the authors studied, in depth, the federal contractor vs. federal employee cost comparison. They found that using federal employees is cheaper than hiring federal contractors as outside consultants—the federal government pays federal contractors almost twice as much as they do federal employees “in total compensation”. And, the report found that federal contractor pay is “more than two times the total compensation paid in the private sector for comparable services”.

This means the Obama administration is hiring less of the most cost-effective workers (according to the POGO report), and it is running an unsustainable deficit. But if federal contractors cost so much, surely there must be rules in place regarding their salaries, right? Of course there are—executive pay for federal contractors is limited. As of 2012, that limit is $763,029. This does not include bonuses. That capped salary is about twice as much as the President makes each year. Profiting from government at this level might be part of the national debt problem.

Between 2000 and 2010 total federal spending approximately doubled and incomes in the D.C.-area’s richest counties (where many major government contractors are headquartered, included several of the ones examined here) grew at around twice the rate as the rest of the country. It is safe to assume that, during this ten year period, there might be a relationship between the sort of federal contracting revenue growth seen in this post’s graphs and DC-area wealth.

It would be convenient to compare the total number of federal contractors with the total number of federal employees to see the growth of one at the expense of the other, but the numbers for total number of contractors do not exist. So when someone mentions the shrinking number of federal employees as a rubric of the size of government, a good question to ask is: where did the federal employee go? There is a good chance that they may have gone into the more lucrative federal contracting business (once a period of time passes after leaving the federal workforce)–this also includes retired workers drawing federal pensions who move into federal contracting and consulting.

The devil is in the details when it comes to statistics used to measure the size of government, both in terms of people performing the work of government and from a financial standpoint. While debates regarding the fiscal future of the country are underway, maybe it’s time to shift the focus away from the number of federal employees, their pay, and benefits (which are very generous), and take a closer look at the explosion of the federal contracting sector.

So when people are citing this statistic and that number during this long game of Russian Roulette with the nation’s, and arguably the world’s, economy, take a second to think about the numbers being shoved down your throat as each side makes their case. Of course there are additional ways to look at government size (pages of regulations, recipients of federal aid, etc), but this is just one.

***Notes on numbers**

I chose the three contractors (Deloitte, Booz Allen Hamiltoin, and Chemonics) because the lion’s share (90%+) of their federal contract revenue goes to the DC/VA/MD area. I did this because I am interested in the impact of government growth/spending on the region. A next step would be to parse the numbers out by region and look only at those in the DC-area. But, from a cursory glance, the total number may change but it isn’t going to change the percentage growth that much. Although Lockheed Martin is headquartered in Bethesda, MD (part of the DC-metro area defined by the U.S. Census), its federal contract dollars are more distributed to various production, manufacturing, and research sites around the country.

From USASpending.gov, about the spending data:

All prime awardee data as reported by agencies. The assistance prime awardee data includes agency submissions as of 12/09/2012 and the contracts prime awardee data includes procurement data downloaded from FPDS as of 12/09/2012. Please note that availability of DOD contracts prime awardee data is delayed by 90 days to protect operations tempo. All Sub-awardee data is based on prime awardee submissions from FSRS, for sub-contracts as of 12/09/2012 and for sub-grants as of 12/09/2012. For more information about the data, data sources, and data timeliness, please seeLearn.

The quality procurement data is maintained by the federal agencies by annual verification and validation of their data in FPDS. For more information on how the quality is maintained and what the government is doing in ensuring the quality please see (PDF).

Photo by Aaron Minnick – www.aaronminnick.com

In the first part of this series we learned about the history of Sallie Mae, what it is, and what it does. Part II will focus on how it does it and make some broad comparisons to other debt-backed financial activity.

Cover photo by Aaron Minnick.

The Basics – Part II

So you have taken out a private loan from Sallie Mae to pay for your tuition. That is, you borrowed money directly from Sallie Mae, not from the federal government, and will have to pay it back. Sallie Mae is called the originator of your loan. Note – Sallie Mae also acts as what is called a Federal Loan Servicer—a collection agency for the Department of Education—but it treats these federal loans it services and collects differently from the loans that the company originates. Sallie Mae has to collect these federal loans under the repayment terms specified by the federal government, which vary in interest rates and other repayment terms, especially from the terms offered by a Sallie Mae originated loan. A full list of these Federal Loan Servicers can be found here.

How does Sallie Mae, and the people who own stock in it, make money off of you and the private loans it gave you directly? The first way they profit, and this is as old as capitalism, is that the company charges interest on the loan you took from it. You pay back what you borrowed, plus a percentage.

But there is more money to be made on loans than only charging interest. The next section will break down, and walk you through how this other money is made, through the sale of SLABs.

Let’s get some definitions out of the way first.

Asset Backed Security – “Asset-backed securities (ABS) are created by buying and bundling (combining) loans – such as residential mortgage loans, commercial loans or student loans – and creating securities backed by those assets, which are then sold to investors.”

I got this definition from the Dodd-Frank website. Dodd-Frank is a comprehensive set of regulations for Wall Street and the financial industry intended to prevent the kind of behavior that Congress agreed was the cause of the 2008 financial crisis. The Wikipedia article on it is a good primer.

And, just to be clear, a security is a financial instrument that has some sort of financial value. Think about stock in a company. A piece of Coca-Cola stock—a share of that company—is a security. It has financial value. It is worth something. There are three types of securities:
1. debt securities – think of buying a bond from the US government, or corporation
2. equity securities – that piece of Coca-Cola stock above
3. derivative securities – what we are focusing on

There are multiple types of derivative securities, but the one we are focusing on is the Asset Backed Security (ABS). Any ABS based on—or backed by—student loan debt is called a Student Loan Asset Backed Security, or SLAB. So how does Sallie Mae make money off of the debt that you borrowed from it to pay for school, aside from the interest rates it charges you?

This might be confusing, but the debt you owe Sallie Mae, and the interest on the loan that you will have to pay over time is the asset part in SLAB. That is, Sallie Mae creates value—a financial instrument—in the form of a SLAB, based on your tuition debt, and sells this to investors.

There are many types of slabs in the world. This article only covers one of them.

How do investors make money? And how does Sallie Mae make money?

This can be confusing, and often it is not broken down so that we all can understand it. A lot of people writing about this topic like to hide behind industry jargon either because they don’t understand it, can’t explain it, or are just lazy.

Sallie Mae takes the debt that borrowers owe it, and they sell that debt (I will explain why an investor would purchase debt). But not all private loan debt held by Sallie Mae is created equal. The following quote is from a Consumer Financial Protection Bureau (CFPB) report on private student loans (most of this next section has been translated from this report):

“A key distinction between federal student loans and many [private student loans] is interest rate risk. Today all federal student loans have fixed rates. Most [private student loans] are variable-rate loans with risk-based pricing, where pricing varies from consumer to consumer based upon an assessment of the creditworthiness of the borrower.”

Emphasis added.

Federal loan repayment interest rates vary from 3.4% – 7.9%. And they are fixed—these rates will not change (the fight over the hike in interest rates earlier this summer would not have affected existing loans, only new ones). Conversely, Sallie Mae’s interest rates range from 2.25% – 9.37% variable, and as of 2012 they offer fixed rates between 5.75% – 12.875%. Other private loan lenders have variable interest rates that can reach 19% variable and 15% fixed (see the CFPB report).

If Sallie Mae deems one borrower not very creditworthy (it does not expect that borrower can repay the loan in full, and on time because they have bad credit), that borrower will be charged a higher interest rate on the loan compared to someone more creditworthy. That creditunworthy borrower is viewed as risky, and is charged more (interest) to borrow money from Sallie Mae. Compare this to the flat, fixed interest rates with federal loans.

So Sallie Mae, as a loan originator, willingly issues debt to people it is fairly certain will not repay the money in the agreed time frame. Kind of dumb, huh? This is where investors come in.

Somebody Out There Actually Wants Your Student Loan Debt

Sallie Mae turns that private student loan debt into a SLAB (again, Student Loan Asset Backed Security), and sells it to an investor. The investor purchases the debt and also purchases the guarantee to be paid the return (interest and fees you pay as borrower) on that debt. If the borrowers of that debt pay Sallie Mae on time, the investor keeps the money. If the borrower does not pay on time, the investor is left holding the bag, and thus the responsibility for that debt. Sallie Mae ‘sells’ the debt because it spreads out the risk that the borrower will default on its payments–the investor takes on some of that risk. And it gives Sallie Mae more liquidity–more money–to offer as new student loans.

And remember that not all Sallie Mae student loan debt is created equal. Each SLAB is rated according to the creditworthiness of the borrower, so that the investor buying the SLAB knows what they are getting into—the risk associated with each SLAB is made clear. The investor knows, or at least has an idea, how likely they are to win or lose on that SLAB. So each SLAB is ranked by creditworthiness of borrowers and sliced into similar pieces as securities (these ‘slices’ are also referred to as tranches of debt).

The returns on the SLAB investment(s) are greater on the higher interest rate loans—the loans given to the creditunworthy borrower. But so are the losses if the borrower doesn’t pay up to Sallie Mae. More risk = more return. More return = more risk. Sallie Mae does all of this because by ‘selling’ the debt it has on its books, it then gives Sallie Mae more money that it can in turn lend out to more borrowers, and create more SLABs based on those loans.

Sallie Mae has an incentive to load as many people as it can up with as much debt as possible.

Cosigners

Remember that with most private loans, unlike federal loans, there has to be at least one creditworthy cosigner. The private lenders want collateral. With federal loans, there are much more generous repayment and forbearance options if the borrow cannot find work—or enough work—to repay the loan. And you do not need a co-signer to take on federal loans. This means that the private lender—Sallie Mae—is going to get its money. Even if this means eating through the bank accounts, retirement funds, and going after the assets (things like houses, cars, wages and social security payments) of the co-signer.

Keep in mind we have been talking about SLABs based on private loans. But know that Sallie Mae also sells SLABs based on federal loans. The interest rates on these federal loans are legally fixed by the government, and therefore have an implicit government backing—it is implied that if the federal loan SLAB market tanks, the government will step in and bail it out since the government was, technically, the originator of the debt.

And, this also carries over to the private loans that Sallie Mae originates: if one portion of the SLABs Sallie Mae trades gets infected from some sort of financial fallout because it recklessly manages the way it tries to make profits (the thing private businesses/corporations are supposed to create), it is likely that it will carry over to the rest of the debt on Sallie Mae’s balance sheet–the government-backed and secured federal loans. Therefore, there is an implicit understanding that all SLABs Sallie Mae trades are insured by the government. Federal loan-based SLABs are low-risk to investors, and Sallie Mae. But not to taxpayers.

If you go back through this article and replace each mention of Sallie Mae with Fannie Mae/Freddie Mac, replace student loans with mortgages, it might remind of you of something.

In Part III, we will use Kaplan University—a for-profit college owned by the Washington Post—as a case study and see that even Sallie Mae has standards when loaning money for tuition (not of their choosing), while making comparisons to traditional public, non-profit, universities along the way. Are credit unworthy borrowers being targeted?

Until then, if you know someone with student loans (or who is thinking about taking out loans) who you think might not know everything covered here, please share this article with them.

But some of the stuff he has pulled over the last few years is pretty funny, and I am concerned with that. I can’t tell if the guy is drunk, kidding, or both. Just look at the picture on his Wikipedia page—it’s like there’s a joke and he’s the only one who knows the punchline.

Let’s take a look at some of Nigel’s greatest hits.

Number One: In May of 2010 Farage was in a plane that crashed (he supposedly has a fear of flying) as it was towing a UKIP campaign banner over a field. It was election day.

The banner read, “VOTE FOR YOUR COUNTRY, VOTE UKIP”

The pilot was later found guilty of making death threats to Farage—after the crash. It all just comes off as some Andy Kaufmann stuff.

I’m not really sure why anyone would even get into a car with this guy, much less an airplane.

Number two: In May of 2012, A UK Independence Party candidate was running for the Mayor of London. The political party (UKIP) forgot to put their name on the ballot.

Nigel says, “What are you going to do?”

Number three: He bootlegged (and sold) his own BBC documentary and admitted to doing it.

Yes, I am aware of some of the grumblings about the UKIP and some extremist elements. This post in no way supports anything they do, or any of its members. I do, however, strongly support this picture: