Student loans mean windfall for government

While U.S. students drown in a collective $1 trillion in loan debt, the federal government reaped $66 billion in profits between 2007 and 2012 from student loans, according to a Jan. 31 report from the Government Accountability Office.

While all loan programs generate some profit for lenders, the government should not fill its pockets by benefiting from student debt. The current system is operating on antiquated assumptions—namely, that college students will take out loans to pay for a degree that will lead to a job, but that is not always the case. Loaning hundreds of thousands of dollars to students who may not be able to pay them back is irresponsible. The loan interest rates need to be reduced to the point of breaking even or the government’s significant profits need to be invested into college affordability and job opportunities.

From 2012–2013, the U.S. Department of Education disbursed $94 billion in loans to 17 million students, according to the GAO report. Yet only 27 percent of college graduates—approximately 483,582, according to the National Center for Education Statistics—land a job in their field of study, according to a May 20 Federal Reserve Bank of New York report. This number climbs for Columbia students, who dropped $22,132 each from 2013–2014 for a liberal arts degree that may not lead to a high-income job. Some will have little to no income after graduation. Many graduates will default on loans, wrecking their credit and sometimes their employability, leaving the government with a pile of defaulted loans, as reported Oct. 22, 2012 by The Chronicle.

To prevent students from entering a dismal job market with crippling debt, the federal government should change its program in two ways: Lower interest rates to reflect market rates and invest its estimated $66 billion in profits into job creation. Market rates are the current interest rates on loans across the board, but because the interest rate on loans fluctuates depending on the market, the amount owed can and has increased in recent years, leaving students with more debt than they began with. Some federal public service jobs pay back student loans as part of a benefit package, and even if the student has to move to a remote location for work, he or she might jump at the opportunity for debt aid.

President Kwang-Wu Kim has repeatedly mentioned narrowing the admissions policy to encourage admission only for students who are financially and academically prepared for a college experience, a wise move for Columbia’s fiscal sustainability, as reported Sept. 3 by The Chronicle.

Before entering college, students should be better informed about how student loans work and the significant amount they will be obligated to repay in the future. Keeping that information in mind, some people may reevaluate attending college at all, choosing instead to pursue a technical education that will lead directly to a job rather than work toward an education that may not boost a career resume. High schools offering basic economics courses should include a unit on student loans because they are a part of many Americans’ futures.

But that doesn’t mean students should be sentenced to debt from high school onward. The student loan crisis cannot be blamed on one party, and the government has more power to pull the strings than the colleges or students, so it should adjust its lending policies to reflect the current conditions. When students start their post-grad lives with heavy debt, it also weighs the economy down, affecting the entire fiscal system, so paying back enormous federal loans that profit the government shouldn’t be a required step in gaining a higher education.

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