Sen. Warren: "We shouldn’t be profiting from our students who are drowning in debt while we’re giving great deals to big banks"
The United States government is reaping billions in profits off the backs of struggling students, according to new figures made public Tuesday by the Congressional Budget Office.
According to the 2013 fiscal year forecast, the Department of Education is slated to bring in an estimated $50.6 billion in profit from student loan interest—an increase of 43 percent from an initial estimate of $35.5 billion.
“We shouldn’t be profiting from our students who are drowning in debt while we’re giving great deals to big banks,” said Senator Elizabeth Warren (D-Mass.), who last week introduced a bill which proposes to lower student loan interest rates to the same "discounted rate" given to big banks, currently set at 0.75 percent.
In comparison, rates for subsidized Stafford loans are 3.4 percent and in July are set to double to a whopping 6.8 percent—nearly nine times greater than the bank rates.
“If the Federal Reserve can float trillions of dollars to large financial institutions at low interest rates to grow the economy," she adds, "surely they can float the Department of Education the money to fund our students, keep us competitive, and grow our middle class.”
As Truthdig's Robert Scheer points out:
Students actually spend their loan money on surviving as consumers in a tight economy, while learning skills needed for the economy of the future. On the other hand, the already too-big-to-fail banks have used the government’s free money to become even more obscenely powerful.
With student debt in the US totaling over $1 trillion, it "eclipses all other forms of household debt, except for home mortgages," reports the Huffington Post.
Further, according to the New York Fed, it is the only kind of consumer debt that has increased since the onset of the financial crisis.
Over the past five years, the Education Department has generated nearly $120 billion in profit off student borrowers, the Huffington Post writes, "thanks to record relative interest rates on loans as well as the agency's aggressive efforts to collect defaulted debt."
"These are young people that we should care a great deal about," said Richard Cordray, director of the Consumer Financial Protection Bureau, during a testimony before the Senate Banking Committee last month.
“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 it's making them unable to rise and succeed and become leaders in our society.”