Are Democrats profiteering off desperate student borrowers? When the White House runs the entire student loan program (via the Department of Education) and also has control of the Senate, and had full control of all Houses for over 3-years and yet maintained student loan policies, we believe this is a fair question–not a political question.
The Democrat Party claims to be for the middle-class and poverty class and yet when it comes to student loans, it has ensured such debts are essentially life-time debts–virtually unescapable by law. So when USA Today reports that the federal government is making windfall profits off the backs of student borrowers [tens of thousands of which SDWP has documented are in extreme dire financial circumstances and hardships], we have to wonder how trustworthy the Democrat Party really is and why student borrowers, their parents and grandparents would ever support them?
Read the following news report to get a better understanding of how the Federal Government Student Loan System Mafia of debt enforcers are making a fortune off desperate students trying to better themselves and having no reasonable alternatives but to borrow from Obama The Man aka Uncle Sam Hell.
USA Today Reports: Government projects to make $50B in student loan profit (June 16, 2013)
DETROIT — The U.S. government projects to make more money off student loans this fiscal year than ExxonMobil, Apple, J.P. Morgan Chase or Fannie Mae made on their respective businesses last year, a new analysis shows.
According to the Congressional Budget Office’s latest projections, the federal government projects a record $50-billion profit on student loans this year. ExxonMobil made $44.9 billion in 2012, according to published reports, making it the most profitable company in the country. And if Congress doesn’t stop rates on some loans from doubling on July 1, that profit will rise more, up to an additional $21 billion, a recent report found. However, there are those who claim the projections don’t accurately reflect risk taken by the government and the profits are much smaller.
“I can understand private companies making profits off student loans — part of mine are private — but it doesn’t make sense for the government to be making huge profits off the backs of young students just trying to make themselves employable in a terrible economy,” said Kristy Currier, 26, of Detroit.
Currier said she pays between 3.9% and 10% interest on her various student loans, which total about $75,000.
The record-high profits on student loans come during a time of historically low interest rates on home mortgages and car loans. While a home buyer can get a 30-year mortgage at about 4.5% interest, the federal government is charging as much as 6.8% interest on unsubsidized student loans and is less than a month away from automatically doubling the interest rate on the loans headed to poor students unless Congress takes action.
Jonathon Whaley’s loan payments suck out about $750 a month from his bank account. The 25-year-old Grand Rapids resident is paying off both federal and private loans. His private loans charge him 4% interest. His federal loans charge him 7%.
“Because the government has almost ensured anyone who applies will get the loan they need, schools have been able to drive prices up with no concern as to where funding will come from,” Whaley said. “With prices skyrocketing, students are taking on way more debt than they can handle but have no other option to compete in the modern economy.”
Whaley, a compliance manager/attorney at an investment firm in Grand Rapids, took out about $250,000 in loans to finance his education at the University of Dayton and Ave Maria School of Law.
“I was lucky to fight through a terrible job market and scrape by enough money to make my loans a burden and not a killer. However, I have dozens of friends who are not so lucky.
“The government needs to remove itself from the student loan industries or else it will continue to destroy my generation.”
When Nathan AuBuchon graduated from Walsh College last fall, he did so with $35,000 in federal student loans he used for schooling at Western Michigan University, Wayne State University and Walsh. The 31-year-old Commerce Township resident, who co-owns a realty company and works in production for Performance Springs, pays $172.66 a month in loans.
He doesn’t have a problem with the government making money off his loans.
“I see it as the taxpayers who are making the money, and I have no problem with that. … The taxpayer should be compensated for their opportunity cost and the risk of loss of their money.”
Where do profits go?
The Congressional Budget Office’s May look at the federal student loan account forecasts the federal government will make more than $173 billion in profits from student loans over the course of the next 10 years.
Those projections are higher than the Obama administration’s projection — which forecast a $34.3-billion profit this year vs. the CBO’s $50-billion projection. Using the administration’s projections, the government is making an average of about 18 cents in net profit from every dollar it lends out.
The government books it profits by lending out money at rates higher than it borrows. The CBO projects the government rate will be 2.1% during 2013. Loan interest rates for borrowers run from 3.4% to 7.9%.