With cuts to public universities and students in debt to the tune of a trillion dollars, the Feds are raking in $34,000,000,000 each year on loans that students are working two jobs to repay. Now that obscenity could get worse if loan rates are allowed to double in July. From the NYTimes:
. . . .On Tuesday, the day before the White House plans to send its budget to Congress, student advocacy groups are releasing an issue brief charging that the federal government should not be profiting from student loans, while more and more students bear a crushing debt burden.
The brief, citing a February report from the Congressional Budget Office, said the federal government makes 36 cents in profit on every student-loan dollar it puts out, and estimates that over all, student loans will bring in $34 billion next year.
“Higher education loans are meant to subsidize the cost of higher education, not profit from them, especially at a time when students are facing record debt,” said Ethan Senack, the higher education advocate at the United States Public Interest Research Group, which is issuing the brief with the United States Student Association and Young Invincibles, an organization for people 18 to 34.
“The revenue from student loans should be used to keep education affordable, and should never be used to pay down the deficit or for other federal programs,” Mr. Senack said.
While it has long been known that the government makes money on student loans, the numbers in the issue brief are surprising, said Terry Hartle, senior vice president of the American Council on Education.
“If the numbers are accurate, the government will make more money on student loans than Ford makes on automobiles,” he said. “Using student loans to create a profit center is not what anybody intended.”
Student loan borrowers graduate with an average debt of $27,000, and the scheduled interest rate increase on subsidized Stafford loans would cost almost 10 million borrowers about $1,000 more over the life of their loan, for each year of college.
According to the C.B.O. report, the government will get 12.5 cents in revenue next year for every dollar lent through subsidized Staffords, 33.3 cents per dollar in unsubsidized Staffords, 54.8 cents on each dollar of graduate school loans, and 49 cents per dollar of parent loans, for a total of $34 billion a year.
Borrowers of subsidized Stafford loans make up more than a third of those using federal student aid. More than two-thirds of those borrowers are from families with an annual income under $50,000. Last April, in his re-election campaign, President Obama made a central issue of stopping the Stafford interest rate increase. A few days later, Mitt Romney expressed a similar view.
Now that the lower rate is about to expire, there is general agreement that it should not double. But a solution is unclear. . . .