$41.3 Billion Loan Profits
November 26, 2013 by staff
$41.3 Billion Loan Profits, The federal government made enough money on student loans over the last year that, if it wanted, it could provide maximum-level Pell Grants of $5,645 to 7.3 million college students.
The $41.3 billion profit for the 2013 fiscal year is down $3.6 billion from the previous year but it’s a higher profit level than all but two companies in the world: Exxon Mobil cleared $44.9 billion in 2012, and Apple cleared $41.7 billion.
“It’s actually neither accurate nor fair to characterize the student loan program as making a profit,” Education Secretary Arne Duncan said during a July conference call with reporters after the Free Press and other news media reported on profits from student loans. The department did not return calls or e-mails seeking comment this week.
The numbers track the entire fiscal year that ended Sept. 30. They come as concern continues to mount about the level of indebtedness by college students and graduates. Estimates show more than $1.2 trillion in student loan debt across the nation, more than the nation owes on credit cards.
Congress is expected to take a look at the issue in the coming months.
In September, the Senate Health, Education, Labor and Pension Committee launched a series of hearings to look at critical issues in higher education ahead of reauthorization of the Higher Education Act, which is set to expire at the end of this year. Among the issues being looked at are the student loans programs, according to Allison Preiss, press secretary for Democratic Sen. Tom Harkin of Iowa, who heads the committee.
‘Profit’ depends on accounting method
Projecting how much money the government will make – or have to pay in a subsidy – on those loans is a tricky, complex formula, based on a variety of factors, experts said.
The federal Credit Reform Act of 1990 set the way the government has to account for its loans. It measures the cash outflow as the disbursement of the principal loan amount and the inflowing money as the payments of interest and principal, minus amounts not paid, plus any fees the government receives from the borrower.
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