Student loan debt is now one of the Obama Administration’s biggest cash cows.
The government is poised to pocket a record $51 billion profit from federal student loan borrowers this year, according to a report by the Congressional Budget Office.
That’s roughly 40% higher than the CBO’s original forecast in February, $35.5 billion.
The Huffington Post’s Shahien Nasiripour helps put the new estimate in perspective:
“Exxon Mobil Corp., the nation’s most profitable company, reported $44.9 billion in net income last year. Apple Inc. recorded a $41.7 billion profit in its 2012 fiscal year, which ended in September, while Chevron Corp. reported $26.2 billion in earnings last year. JPMorgan Chase, Bank of America, Citigroup and Wells Fargo reported a combined $51.9 billion in profit last year.”
Student debt is second only to mortgage debt in American households, and it’s the only kind of debt that’s steadily increased even throughout the recession. We’re long past the $1 trillion-mark for federal and private student loans combined, but federal loans may break $1 trillion on their own soon enough.
Congress is set to debate whether or not to cap the interest rate on federal subsidized Stafford loans at 3.4% this July, or let them double. Even if they decide to cap it again, the move would only impact about 8 million borrowers.
There are a couple of pieces of legislation making the rounds that would lower interest rates on federal student loans or make it easier for students to refinance their debt. Last week, Sen. Elizabeth Warren proposed the Student Loan Fairness Act to give students the same interest rates on federal subsidized Stafford loans as big banks, 0.75%. A petition supporting her has already garnered 400,000 signatures.
Still, none of these moves would really help today’s student borrowers. Student loans are practically impossible to discharge in bankruptcy, and for those unlucky enough to have borrowed from private lenders, variable interest rates can be crushing over time.
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