As many college graduates struggle to pay back their student loans, the United States government is raking in the cash — nearly $51 billion of it.
Figures released by the Congressional Budget Office on Tuesday show that the Department of Education is estimated to turn a $50.6 billion profit from student borrowers in fiscal 2013, an increase of 43 percent from the February forecast of $35.5 billion, according to The Huffington Post.
The projected fiscal 2013 profit for the DoE is larger than the 2012 profit of the nation’s most profitable company, Exxon Mobil Corp. — which raked in a net income of $44.9 billion last year.
But there’s more to that $51 billion figure than what meets the eye.
The large profit is good news for taxpayers, who won’t have to foot the bill for students’ degrees with the Department of Education firmly in the black, according to Neal McCluskey of the Cato Institute.
“Taxpayers should be happy they’re making money off of these [loans], because if they don’t, the taxpayers are the ones who pay,” said McCluskey, associate director of Cato’s Center for Educational Freedom. “And the profit they make off of them is already — you know, they factor it into future budgets and say, ‘We don’t need to spend taxpayers’ money on x, y and z because we’re going to use this revenue from student loans to do it.'”
But the news is less exciting for college students, who are responsible for providing such a large profit for the Department.
“If I were a student, I’d be concerned because — I mean, most students are under the impression that the federal government is trying to get you money as cheaply as possible and not make a dollar on it,” McCluskey said. “And clearly that’s not the case.”
McCluskey said that the profit for fiscal 2013 is extended out over time, meaning it’s the profit the Department of Education will eventually make on student loans granted during the year. He also noted that the CBO doesn’t calculate the risk of those loans not being paid off, and therefore the fiscal 2013 profit will most likely be less than projected.
He also added that the real problem isn’t so much that the Department of Education is turning a profit, but that it is willing to extend loans — often with lower interest rates than in the private sector — to just about anyone who applies for them.
“[The biggest problem is] that they still give out cheap loans that artificially inflate consumption of college, and therefore drive — or fuel — rampant tuition inflation,” he said.
