The Education Department is Rolling in Revenue Thanks to Your Student Loans


For those of you struggling to make ends meet due to being thousands of dollars of debt from student loans, maybe you should think about it this way: at least you are helping out the Department of Education!

Financial reports from the 2013 fiscal year show that the Education Department has reaped $42.5 billion in profit from federal student loans in 2013. This is a third higher than it was in 2012, and is the second highest revenue ever received by the department, which earned a staggering $47.9 billion from student loans in 2011. The 2013 profit from student loans comprised nearly half of the agencies total revenue, showing just how lucrative a business lending money to students is for the federal government.

So what has the Department of Education done with these revenues? Maybe expand Head Start programs, improve public education, or provide more financial aid for college students? Nope, the answer is none of the above. Arne Duncan, Secretary of Education has used these profits to subsidize the Department’s existing expenses, and reduce the cost of operations to its lowest levels since 2001, spending just $40.9 billion in 2013, according to the Treasury Department. This a third less than they spent last year.

While this looks good as far as reducing the federal deficit goes, there are serious implications to the government reducing its spending by profiting off the overwhelming burden of student loans. These young people struggling with loans could slow future economic growth for the country, as the Federal Reserve has produced research explaining. “Student loan debt … is a burden which is affecting, for example, the ability of many young people to buy a first home, affecting other purchasing decisions they might make, affecting obviously their overall financial condition,” Federal Reserve chairman Ben Bernanke said “To the extent that there’s a lot of student debt held by people who are not working, it’s obviously yet another drag on recovery.”

At a public meeting Treasury Secretary Jack Lew said, “This debt is hampering our economy by keeping young people from buying homes, creating businesses and saving for retirement. At the same time, loan default rates are rising.”

Currently in America there is $1.2 trillion of student loan debt, with the average student carrying $26,000 in debt from student loans, a nearly 43 percent increase from 2007. Federal data shows that as of the end of the 2013 fiscal year, over 90 percent of federal student loan repayment was at least a year late, demonstrating just how serious of a burden this debt is on young people.