Citigroup is using manipulative tactics to trick unsuspecting college students into opposing President Obama’s plan to overhaul the student loan system. The company, which received $45 billion in federal bailout money, sent an email to its student loan customers (myself included) encouraging them to write their representatives in opposition to the proposed reform.

The current system allows private banks to lend students money for college without any risk, because the loans are insured by the government. Banks make bank with this system, since without any risk the interest is pure profit. Obama sensible reform proposal is to cut out the middle man and have the federal government lend directly to students. Naturually, companies like Citigroup oppose the measure because it would take money out of their pockets and give it back to students.

It’s bad enough that Citigroup is using taxpayer money to foster opposition to banking reform program; the company is also doing it disingenuously. The email is formatted to look like a financial statement email–it’s sent from an email address at the same domain name, it has the same logo, and it has the same footer inviting me to check my statement. The only reason I opened the email was to check my accountable balance. Plus, the arguments in the email are straight up wrong:

May 7, 2009


Thank you for the opportunity to help you obtain the education of your choice. As a student loan provider for the past 50 years, Citi has provided financial aid assistance to millions of students and parents nationwide.

Given the challenging economy and continued increases in the cost of higher education, it is critical that the U.S. student lending system serves the best interests of students and their families. If you believe that competition and choice among student loan providers is valuable, you have an opportunity to make your voice heard.

Why Get Involved?
The government budget outline proposes offering federal student loans solely through the federal government’s Direct Lending Program starting July of next year. While this proposal will not impact a borrower’s ability to obtain a federal student loan, it will eliminate your ability to choose a student loan provider. It will also substantially increase the national debt since each and every federally-insured student loan will be funded by the Federal Treasury through the issuance of treasury securities. This proposal impacts you as a citizen – both as a taxpayer and as a borrower.

Why Does Competition And Choice Matter?
Without private lender involvement through the Federal Family Education Loan Program, students and their families will not enjoy the benefits that competition has made possible for more than 40 years. This competition has provided not only a choice of lenders, but also innovative products and services, such as:

  • a variety of borrower benefits that lower your cost of borrowing
  • financial literacy programs that educate you on how to borrow responsibly
  • web-based tools and resources to advise you about your financing options
  • default prevention services to help you pay back your loans

Competition also has driven increased customer satisfaction as a result of the responsiveness, personal attention and on-campus support that student loan lenders have provided to borrowers and schools nationwide.

Make Your Voice Heard
If you value the ability to shop for, evaluate and choose your student loan provider, make your voice heard by contacting your Members of Congress and by signing one of the online petitions that support borrower choice and competition in federal student lending.


The Student Loan Corporation

Citi highlights four benefits to allowing the private market to suck away student loan customer’s money. The first, that competition produces “borrower benefits” that lower costs, is just a lie. Private banks lend money to make more money; the federal goverment isn’t interested in turning a profit on loans. Who do you think will charge you more for a loan?

Second, Citi says competition encourages companies to offer “financial literacy” programs. The only financial literature I’ve ever received from Citigroup are invitations to sign up for credit cards. Perhaps financial education should be left to institutions that don’t have a financial stake in brainwashing customers…

Third, Citi says they offer convenient web-based tools. The government doesn’t know how to use the internet?

Finally, Citi says they offer default prevention services. I fail to see how the government could possibly offer less help to student borrowers than a giant, multinational conglomerate. Citi should focus less on twisting the truth for political gain and more on managing their company. If they did, we might not be in this mess.