Student loans reach another troubling milestone
(MoneyWatch) The nation's student loan burden has reached another worrisome milestone. Total federal student loan debt is now estimated to be close to $1.2 trillion.
That debt, including both federal and private college loans, crossed the $1 trillion dollar mark at the end of 2011. However, federal student debt, including the popular Stafford Loans, has now reached the milestone all by itself, according to a new estimate by the Consumer Financial Protection Bureau.
Private student loan debt is harder to measure, but the CFPB estimates that private loan debt has increased from $150 billion in late 2011 to $165 billion now.
- A third of student loan borrowers never earn degrees
- 25 free things college grads can do now
- 8 ways to cut the cost of college
According to the bureau, student loan debt has grown 20 percent from late 2011 to May 2013. In contrast, credit card and other revolving debt has increased less than 2 percent during the same period.
While $1.2 trillion is a large figure, the CFPB notes that college debt could be much larger. After all, the money that families tap from their retirement accounts, home equity lines and credit cards to cover college costs is not counted as college debt.
As college debt continues to balloon, there is little evidence that Congress is taking the problem seriously. Lawmakers recently let the interest rate on new subsidized Stafford loans double after failing to reach agreement on stopping the rate hike. (That said, the press and politicians have overhyped the consequences of the rate hike, which I explain in this post.)
Who is profiting from high student debt
Here's what has been largely overlooked in the debate over swelling college costs: The federal government has been making money off student debtors. According to the Congressional Budget Office, the U.S. will pocket a record $51 billion in profits this year off new and current federal student loans. According to government estimates, the federal government will pocket $184 billion in profits for new loans made this year through 2023.
Sen. Elizabeth Warren, D-Mass., asserted Wednesday that such profits are "morally wrong" and "obscene." She added, "The government should not be making profits off the backs of our students. Period."
