Student loans have long been a way for low-income individuals to attain higher education. The idea behind such loans is good. Students who cannot afford to pay for their education out-of-pocket can still have access to higher education, and in turn, a brighter future.
So what is the problem here? Unfortunately, it is a problem seen repeatedly when it comes to money — greed.
Government-funded student loans are crucial for many students, but with current interest rates and looming interest rate spikes, student loans can do more harm than good.
According to whitehouse.gov, in 2010 graduates who took out student loans owed an average of $26,000 by the time they left college. And student loan debt has surpassed credit card debt for the first time ever with the current debt amount nearing $1 trillion.
The most startling thing about these numbers however, is not the numbers themselves, but the fact that the federal government is actually making a huge profit off of these student loans.
Sen. Elizabeth Warren (D-Mass.) said in USA Today, “The student loan program has turned our young people into profit centers for the government. The Congressional Budget Office says we will make $51 billion in profit from this year’s loans.”
Warren also said that Republican plans for student loans would generate an additional $16 billion in profits.
“Students cannot — and should not — pay more,” she said. Many Americans, especially students and their parents, agree completely with this sentiment.
Last month Warren introduced the Bank on Students Loan Fairness Act. This act would give students the same low rate that big banks receive when borrowing money from the Federal Reserve, currently around .75 percent.
While Warren’s plan is a little too good to be true (that rate would hardly cover processing costs and defaulted loan costs), she is headed in the right direction. The government should not be making a profit — let alone a $51 billion profit — off of students.
A plan should be enacted that will lower student loan rates to the point of covering costs only. Doing so will leave students in a position to positively impact the economy following graduation as opposed to paying back thousands upon thousands of dollars in student debt.