January 31, 2014

Democratic Senators Highlight Obscene Government Profits Off Student Loan Program

GAO Report Released Today Projects $66 Billion in Profits Off Last Five Years of Federal Loans

Washington, DC - United States Senators Elizabeth Warren (D-MA), Barbara Boxer (D-CA) Jack Reed (D-RI), Chuck Schumer (D-NY), Sherrod Brown (D-OH), Mark Begich (D-AK), Kirsten Gillibrand (D-NY), Richard Blumenthal (D-CT) and Chris Murphy (D-CT) responded to a Government Accountability Office (GAO) report released earlier today, which estimates that federal student loans originated between 2007 and 2012 will bring in $66 billion in revenue. The report follows projections released last spring and summer by the Congressional Budget Office (CBO) estimating that the federal government will bring in an additional $185 billion in profits on new student loans made over the next ten years.

The senators committed to continue advocating for students and their families to wring government profits out of the student loan program and address the $1.2 trillion in outstanding student loan debt that is crushing families and putting a strain on the economy.

"This is obscene.  The government should not be making $66 billion in profits off the backs of our students.  The report issued today reinforces what we already knew - instead of investing in our children and their futures, the government is squeezing profits out of our young people and adding to the mountain of debt they will spend their lives struggling to repay," said Senator Warren. "We cannot bury our heads in the sand and pretend the profits don't exist, or use accounting tricks to make them disappear. It's time to end the practice of profiting from young people who are trying to get an education and refinance existing loans." 

"This report underscores what we've been concerned about for some time-the government is making obscene profits on the backs of our students," Senator Boxer said. "It is wrong and we must fix it." 

"The GAO report makes clear that Congress must do a better job of pricing students loans closer to the actual cost to the government.  Students and parents who borrowed at needlessly high rates should be given an opportunity to refinance at a lower rate.  The bigger question that the report does not address is that the student loan programs were originally seen as an investment, not a profit center or even a cost-neutral proposition.  We invested in offering low-cost loans to create opportunity, spur innovation, and grow our economy.  Today, student loan debt is becoming a drag on economic opportunity and growth.  We must turn the tide," said Senator Reed.

"Everyone, left, right, and center, agrees that the federal government should help middle-class families afford a college education for their kids," said Senator Schumer. "When a student goes to a school that's not right for them because of financial reasons, that student loses, their family loses, and America loses. We need to be investing in higher education for our students, not making money off of them."

"It's wrong that that our students are being saddled with high interest rates and a lifetime of debt, while the government, student loans servicers, and Wall Street megabanks are reaping huge profits at their expense. Higher education should be a pathway to opportunity, not financial exploitation," said Senator Brown.

"It's outrageous  that the government is making billions of dollars off of the student debt crisis while student debt in this country is deterring a full economic recovery and hurting families everywhere," said Senator Begich. "Students across the country are facing crushing debt and these profits are directly at odds with finding a real, longterm solution. As the former chair of the Alaska Commission on Postsecondary Education, I know the importance of making college more affordable for Alaska students and am committed to making sure  the federal government refocuses its efforts to make higher education both accessible and affordable for families everywhere."

"More graduates and middle class families are burdened by student loans than ever before and are struggling to repay a higher amount of debt than ever before," said Senator Gillibrand. "What today's report clearly shows is that while these graduates struggle to get their heads above water, the federal government is putting a priority on $66 billion in profits over their futures, which is just wrong. Our role in government should be helping future generations enter the middle class and thrive through a quality education, not sustaining a huge profit center on their backs. It is time for graduates to have the same option to refinance their debt as homeowners, banks and even the government. It is the right thing to do for middle class families and the economy."

"I was astonished and appalled by today's GAO report, which confirms that the government has continued to make humongous profits off college students - adding to the crushing mountain of debt that drags down America's future," Senator Blumenthal said. "With existing student loan debt now reaching $1.2 trillion, it is past time that we start investing in students and stop profiting off their backs. Exploiting American students - indeed condemning them to insurmountable debt - is unwise and unconscionable."

"It's disgraceful that the federal government could make a whopping $66 billion profit off of students who are already strapped for cash," said Senator Murphy. "Right now, it's harder than ever for young people to afford the cost of college, and instead of profiting off this struggle, the government should act on the bigger problem: rapidly increasing costs of college. The most important thing Congress can do for students is to pressure schools to bring down the cost of tuition through new accountability standards, and I'm proud to advocate for innovation and accountability with the College Affordability and Innovation Act."