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Hey Kids, Stay In School — Your Loan Payments Are Paying Our Bills!

May 15, 2013

The Obama administration is forecast to turn a record $51 billion profit this year from student loan borrowers, a sum greater than the earnings of the nation’s most profitable companies and roughly equal to the combined net income of the four largest U.S. banks by assets. (HuffPo)

So hey, on the one hand that’s great that those funds aren’t just making their way in to the pockets of the banks anymore. But, on the other hand, it seems a bit out-of-step with our long-held values about the pursuit of higher education as a national good. I guess some might say it’s a national good that struggling borrowers are helping to bring down the deficit so we don’t have to  slash oil and gas subsidies or something. Personally, it makes me queasy that our government is profiting in this way.

The Education Department has generated nearly $120 billion in profit off student borrowers over the last five fiscal years, budget documents show, thanks to record relative interest rates on loans as well as the agency’s aggressive efforts to collect defaulted debt.

This is not the way it’s supposed to be.

A survey released last Friday shows about three quarters of those surveyed struggling with student debt. It’s doing no good, and much harm, to our economy that these borrowers are delaying marriage, home-buying, saving, and all kinds of other spending that would stimulate the economy because of the heavy burden of student debt.

Fortunately, Senators Elizabeth Warren and Sherrod Brown get it.

“Wall Street, student loan servicers, and now the government are reaping profits at the expense of students,” said Sen. Sherrod Brown (D-Ohio). “When everyone is benefiting from student loan policy except students and graduates, we have a problem.”

“The fact that the government is now expected to profit $51 billion off student loans this year — more than the annual profit of any Fortune 500 company and about five times the profit of Google — is just plain wrong,” said Sen. Elizabeth Warren (D-Mass). “We should put an end to the practices that generate Fortune 500 profits off of our students.” (HuffPo)

Hear, hear!

2 Comments leave one →
  1. Dr. Denny permalink
    May 15, 2013 6:38 pm

    As someone whose student loans will not be paid off until I am 86 years old, I empathize. The coming doubling of interest rates for students is immoral, odious, and usurious.

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