It probably wouldn’t come as a shock to most people to learn that Exxon Mobil and Apple were two of the most profitable companies in the U.S. last year. With profits of $44.9 billion and $41.7 billion, respectively, the oil and electronics giants raked in quite a bit of revenue. But you may be surprised by which government program reported profits nearly as high: federal student loans.
USA Today reports that the U.S. government made $41.3 billion in student loan profits during the last fiscal year. That’s down from the previous year’s total, but the report comes just as student loan debt eclipses the $1 trillion mark.
In fact, Americans owe more in student loans than they do in credit card debt, as posted in the latest quarterly report from the New York Federal Reserve. And, according to the Congressional Budget Office, the popularity of these loans is unlikely to decrease. The non-partisan budget agency projects net loan volume (the total dollar amount offered in loans), net number of loans, and average loan amount to continue to increase every year for the next 10 years.
These trends have many economists and policy experts worried about the increasingly negative effect student loan debt is having on the U.S. economy’s ongoing recovery. Said Federal Reserve Chairman Ben Bernanke recently: “[Student loan debt] is affecting, for example, the ability of many young people to buy a first home, affecting other purchasing decisions they might make, affecting obviously their overall financial condition . . . To the extent that there’s a lot of student debt held by people who are not working, it’s obviously yet another drag on recovery.”
In July, Congress passed legislation that would tie student loan interest rates to financial markets, locking those rates in for the duration of the loan and capping the maximum applicable rate at various levels depending on the type of loan and level of study they will pay for. CBO estimated that would increase federal outlays by about $25 billion over the next five years.
Michael Tasselmyer ([email protected]) is policy analyst for the National Taxpayers Union Foundation. Used with permission of the GovernmentBytes blog of the National Taxpayers Union Foundation at http://www.ntu.org/governmentbytes/