Student Loan Debt: Why is the Government Making a Profit Off Of Suffering Students?


Student loan debt is more than $1 trillion. Congress is struggling to prevent rates from doubling in less than two weeks. Yet a report released this week indicates the federal government stands to make a profit of $50 billion this fiscal year. This should raise everyone's blood pressure.

Institutions which lend money should be able to make a profit for taking the risk. That is what interest rates are meant to do. For a private lender, maximizing profit as market conditions allow is perfectly acceptable. For the federal government, loans should not be a major profit center.

According to the report, the $50 billion projected profit is more than ExxonMobile, Apple, J.P. Morgan, or Fannie Mae made last year. This should not sit well with anyone, especially all current and former students who hold a part of the more than one trillion dollars in total student loan debt.

Loan rates on subsidized student loans are scheduled to double on July 1 to 6.8% unless Congress acts. Since a $50 billion profit is being generated from 3.4%, this not only makes no sense, but borders on criminal. Senators are discussing a compromise that would set rates at 3.8% for current loans and tie future loans to market rates. They are probably patting themselves on the back thinking this is reasonable. I strongly disagree.

Government loans, whether subsidized or not, should not be a profit center. Interest rates should be set so as to generate only enough profit to cover the costs of the government borrowing the money and administering the loans. Nothing more, nothing less. Until voters can convince the government to get out of the loan business entirely, government lending programs must operate as non-profits. This is what Congress should be putting into legislation. This is what students and anyone who cares about the state of higher education in this country should be demanding.