Us Government “profits” From Student Loans In 2013 Surpassed $41 Billion

I am quite concerned that financial regulators and the public lack basic, fundamental data on student loan origination and performance, Chopra said in a speech at the Federal Reserve Bank of St. Louis. The lack of good data is adding further uncertainty about the potential spillovers into the rest of the economy, he added. Federal officials outside the Education Department, especially those at the Treasury Department, have long complained about the lack of reliable data on the federal governments $1 trillion student loan portfolio. For example, officials are unable to determine the number of borrowers delinquent on their obligations, or the share of distressed borrowers in repayment plans that are based on their monthly incomes.

This announcement is extremely concerning and is one that will see the public subsidising a private company making a profit from public debt, which is incredibly problematic,” she said. The impact of this sale wont only affect borrowers, but will affect everybody. “The simple fact is that having these loans on the public books would be better off for the government in the long run. Selling off the loan book at a discount to secure a cash lump sum now doesnt make economic sense.” Earlier this year, one university head anonymously told The Guardian: “There is quite a lot of evidence that students and parents don’t really understand the new financial system, so you could play around with it quite easily.” The NUS has raised concerns the terms and conditions on student loans are not protected by law – even though David Willetts has assured the union they would not be changed as a result of the sale. The current student loans system is completely unsustainable,” Pearce added. “Forcing debt onto students as a way of funding universities is an experiment that has proven not to work and there needs to be some serious thought about moving the system away from this ridiculous model. Of the loans sold, approximately 46% are earning below the repayment threshold; 14% of borrowers are still repaying and 40% are not repaying their loans in accordance with their terms.

Posh U arranges a federal student loan and gets the money, but its not on the hook of Joe Student goes broke. Hence the bath of advertising from for-profit colleges on daytime TV, hoping to reel in the idle. All this reminds us of mortgage lenders who made bad loans, then sold them off to the government-sponsored mortgage companies, which guaranteed them. Home sellers got paid. So did the lenders. They made Uncle Sam the sucker.

Bankruptcy Code is ill-equipped to handle student-loan debt, which, at about $1 trillion, has outgrown credit cards as the largest source of consumer debt, excluding mortgages. Pennsylvania resident Daisy Ellerbee, 38 years old, has two years of payments left on her Chapter 13 bankruptcy plan and now owes more than $30,000 on a loan that she co-signed for one year of her daughter’s education at West Virginia University. The original loan amount was $24,700, she said. “They kill you with the interest rate,” said Ms. Ellerbee, who said she and her husband filed for Chapter 13 after a series of setbacks, including the 2006 flooding of their home. Pennsylvania bankruptcy attorney Patricia Mayer said that situation isn’t uncommon.

Effectively subsidizing half of the agency’s total operations, the profits have enabled Sec. Duncan to reduce the Education Departments total cost to the smallest amount since 2001. The Education Department spent $40.9 billion in 2013, nearly a third less than 2012 and the lowest reported amount since the first year of George W. Bushs presidency, according to the Treasury Department. Student loan profits last year exceeded the amount of money for federal Pell Grants given to low-income college students, according to budget documents. The administration has increased Pell Grant funding in part due to reduced costs of student loans, giving the appearance of one group of students subsidizing another.


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