Education Secretary Arne Duncan speaks to a House committee on education matters. (Image Source: House Committee on Education and the Workforce)
Today, the Department of Education announced profits to the tune of more than $42.5 billion. How can a federal government agency earn that much money? Simply through the use of student loan payments. These student loan profits are the second highest in the Education Department's history, and have allowed Education Secretary Arne Duncan to cut spending in the department to the lowest level since 2001. However, it comes at a great cost: The Education Department profited more from student loans than they provided in low-income Pell Grants for college students. If nothing else, this profit-taking fleeces college students, especially at a time when a college degree no longer guarantees people a place in the job market.
The student loan profits from the 2013 fiscal year were not even a record haul. The Department of Education gained that record in 2011, with nearly $48 billion. The 2013 profits were a third higher than in the previous year. Of course, rather than putting the money into good use, such as expanding programs, the student loan profits went back into reducing the taxpayers' bill. Perhaps, if the real intent is to reduce spending, maybe cutting programs would be more viable?
By shifting the burden of funding the Education Department from the taxpayer to the college graduate and their family, the department is given the incentive to rip off students. Rather than providing for them with Pell Grants, staffers in the Department of Education will want to expand loans for the profits they take. Colleges and universities, lately all too eager to accept federal loan to help expand their schools into bloated institutions, have been in on it.
Some Congressional members, including Senator Elizabeth Warren of Massachusetts, have called the practice into question, bringing up the fact that student loan debt now exceeds $1.2 trillion, nearly double the deficit of the federal budget. In addition, the average student loan debt stands at $26,000, with the class of 2013 in particular taking on an average load of $35,200. Such debts make it hard to have a healthy financial situation, and makes it really difficult for graduates to do important things in life, such as buying their first house, start up their first business, among many other things.
This has to change. Student loan debt has to not only addressed now for college graduates, but also with prospective freshmen. The reliance on student loans to not only get into college, but also provide funding for the government in a rather twisted way down the line, will break this country if the trend continues. Otherwise, the situation becomes a Ponzi scheme that will collapse under its own weight.