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Education Department Making a Killing on Student Loans
The U.S. Department of Education may generate $51 billion in profit this year at the expense of student loan borrowers, placing the government department at the top of the list of highest earners in the country. Figures released yesterday by the Congressional Budget Office suggest that the Department Of Education’s profit forecast is a 43 percent increase from its February estimate, and a significant increase from 2012.
The Huffington Post reports that the estimated increase in the Department of Education’s earnings is likely to create a political firestorm, as students across the country continue to carry the weight of incredible amounts of education debt that prevents them from buying cars and houses, making investments and saving for retirement.
In the last five years, the Education Department generated almost $120 billion in profit, mostly due to interest rates that do not budge and the department’s ability to collect on student loan debt regardless of bankruptcy.
Student debt levels are currently at a record rate, and students are being charged greater interest levels than banks and companies that borrow money from the government, and even what the U.S. government itself pays on its debts. Rates are currently set at 6.8 and 7.9 percent. The total amount of student debt in the U.S. is currently $1.1 trillion, and it is the only type of debt that has grown since the financial crisis began.
According to another Huffington Post report, Congress was recently asked by President Obama to tie federal student loan interest rates into the government’s own borrowing costs, and Democratic senators proposed the Student Loan Affordability Act, which would keep existing interest rates for needy families fixed at 3.4 percent.
“The whole student loan problem is a problem that should be of deep concern to this body,” said Richard Cordray, director of the Consumer Financial Protection Bureau. “These are young people that we should care a great deal about. They’re the ones with the ambition, aspirations, and dreams, and they’re getting saddled with debt that they don’t understand. It’s holding them back, and making them unable to rise and succeed and become leaders in our society.”
The Department of Education’s predicted profit from 2013 puts them ahead of the largest company in the U.S., Exxon-Mobil, which reported $44.9 billion in net income in 2012, and the second largest company, Apple, Inc., which reported $41.7 billion in profit during the same year.