(Reposted with permission from One Wisconsin Now)
Madison — As thousands of University of Wisconsin students and their families prepare to celebrate their graduation, the federal government has revised its estimate of how much profit they will earn from the loans many students took out to pay for their education. The Congressional Budget Office is now projecting the government will make a $51 billion profit from student loans in fiscal year 2013, roughly $6 billion more than Exxon-Mobil, the most profitable corporation in the U.S. in 2012, according to a report in the Huffington Post.
One Wisconsin Now Executive Director Scot Ross commented, “It is obscene that our government is projected to make more off the loans students have taken out to pursue their higher education than the most profitable corporation in the country made in net profits last year. “
Student loan debt was the only consumer debt to increase during the Great Recession that began in 2007. Total student loan debt in the U.S. surpassed one trillion dollars in 2012, and is now the second largest form of consumer debt in the nation, exceeding credit cards and auto loans and trailing only mortgage debt. Federally originated student loans account for approximately $850 billion of the trillion dollars of debt.
Ross noted that the already outrageous profiteering off the aspirations of college students could get even worse. Unless Congress acts, interest rates on federal student loans are set to double as of July 1st. Alternately, U.S. Senator Elizabeth Warren of Massachusetts has proposed helping students by giving them the same interest rates, now under 1%, for their federal loans as big banks get when they borrow money from the Federal Reserve.
He said, “There are clear choices before Congress. They can do nothing and allow the trillion dollar student loan debt crisis to continue hurting students and their families and dragging down our economy. Or they can start to take real action, like that proposed by Senator Warren, to give the finances of students and their families the same attention as the profits of big banks.”
Original research by the One Wisconsin Institute found that the impact of the trillion-dollar student loan debt crisis goes far beyond students and their families. Graduates with a Bachelors degree report making average monthly payments of $350 for an average term of 18.7 years. The economy-wide detrimental impacts of this debt include over $200 million in lost new auto sales every year and significantly lower rates of home purchasing and ownership among graduates earning solid middle class incomes but are saddled with student loan debt.
The Institute’s research was recently confirmed in the Federal Reserve Bank of New York’s survey of consumer debt that found student loan debt negatively impacted the ability of individuals to finance auto and home purchases. In addition, The U.S. Federal Reserve has identified rising levels of student loan debt as a risk to economic recovery.
“Allowing the trillion-dollar student loan debt crisis to continue to fester is bad policy for our economy and an insult to the middle class and students. Profiteering at obscene levels from students pursuing a higher education and turning higher education from a pathway to the middle class into a sentence of indebtedness must stop. Now,” concluded Ross.
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One Wisconsin Now is a statewide communications network specializing in effective earned media and online organizing to advance progressive leadership and values.