From boston.com (emphasis mine):
U.S. Sen. Elizabeth Warren said Saturday she is shocked that the federal government is earning an estimated $66 billion in profits from student loans originated between 2007 and 2012.
The Democrat from Massachusetts was reacting to a Government Accountability Office report Friday. A previous Congressional Budget Office report estimated that the government will pocket an additional $185 billion in profits on new student loans made over the next 10 years.
‘‘This is obscene. The government should not be making $66 billion in profits off the backs of our students,’’ Warren said in a statement. ‘‘This report reinforces what we already knew — instead of investing in our children and their futures, the government is squeezing profits out of our young people and adding to the mountain of debt they will spend their lives struggling to repay.’’
Warren and eight other U.S. senators committed to wring government profits out of student loans and address a $1.2 trillion in outstanding student loan debt they say is crushing families and putting a strain on the economy.
‘‘We cannot bury our heads in the sand and pretend the profits don’t exist, or use accounting tricks to make them disappear,’’ Warren said. ‘‘It’s time to end the practice of profiting from young people who are trying to get an education and refinance existing loans.’’
Yes, the government is running a significant deficit and should be looking for additional revenue sources but treating student loans as a profit center is just gross.
UPDATE: So Dean Baker‘s been posting on ‘big number syndrome’ (my term, not his) where news organizations run stories involving big numbers – “Billions of dollars!!!” – which end up looking not so big when put in proper context. Lo and behold I end up falling victim to the syndrome. $1.2 trillion total outstanding student debt. $66 billion in profits over six years is $11 billion per year. $11 billion is about 1% of $1.2 trillion. 1% annual return on investment isn’t exactly raking it in. No, student loans shouldn’t be a profit center but 1% per year hardly seems worth much of a fuss.
Average student loan debt is nearly $30k. Averages can be misleading though as a few large values can skew the statistic – median debt might be a more instructive number. Here’s what I found for info on who owes how much:
As of Quarter 1 in 2012, the average student loan balance for all age groups is $24,301. About one-quarter of borrowers owe more than $28,000; 10% of borrowers owe more than $54,000; 3% owe more than $100,000; and less than 1%, or 167,000 people, owe more than $200,000. (Source: FRBNY)
(The $29.4k number from CNN Money appears to be more recent than the $24.3k number cited above.) I also found this site but haven’t read any of the content.
Numbers in hand, I think fair to say that it would be a much bigger deal to make college education more affordable and reduce the debt burden students take on in the course of obtaining their degree. Over the past 35 years college tuition has risen four times fast then the Consumer Price Index – a 12x increase in real dollars. Invest in public colleges and universities. Subsize them generously and drive the cost of tuition down into the realm of the affordable. Create high quality public institutions which are more affordable than their private counterparts. (Wasn’t that the case once upon a time?) Yes, doing so would probably mean a bit more out of our pockets in taxes but there need to be a modestly priced options available in order to hold costs down. (Hey, sometimes markets work.)