Student loans: Government looks to make $50B profit

Photo: Amagill via Creative Commons

Lauren Brice, who recently graduated with a law degree from George Mason, has money on her mind.

“My undergraduate loans and my graduate loans together are about $167,000,” she says.

The notion, according to a Congressional Budget Office report that the government will make a record $50 billion profit on student loans this year, has her unsettled.

“It seems weird that they would make that much money off of student interest loans, especially when the purpose is to get us an education,” she says.

Home buyers using services like Freddie Mac can get a 30-year mortgage with a 4.5 percent interest rate, but the feds charge as much as 6.8 percent on an unsubsidized student loan.

“Should the federal government be in the business of lending money and the answer to me is absolutely no,” says Veronique de Rugy, an economist.

De Rugy says the government loans are well-intended, but will leave students deep in debt.

“While you have subsidized rates, you have to borrow way more money to send your kids to college,” she says.

Experts say the wide availability of loans means some schools are driving up prices. Seniors like Lisa Kaufman, who attends the University of Maryland, are especially concerned.

“You’re just putting people on this terrible cycle of being able to get a job, but not paying the loan,” she says.

De Rugy is among those who believe this could all end badly, much like the real estate bubble. Students and new graduates, she says, will end up paying the price.

“They’re just trying to find a job that will pay them well enough to be able to pay it off, but they’re stressed out, of course.”