The Huffington Post reported last week that the U.S. Department of Education had taken in more than $42.5 billion in profit from federal student loans this year, as of September 30.
The website reported that the huge profits are alluring to the agency, which says that it has been working with borrowers struggling under the weight of substantial student loan debt. “That total was roughly a third higher than in 2012 and the agency’s second-highest ever profit haul after a $47.9 billion gain in 2011,” the Huffington Post reported.
This summer, President Barack Obama and Congress passed legislation to lower federal student loan interest rates; if not for the new rates, the Education Department would have brought in about $8 billion more.
“In a sign of just how important student loan profits have become for the Education Department’s bottom line, its reported gains off lending to students and their families over the last year comprised nearly half of the agency’s total outlays, the biggest share since at least 1997,” the Huffington Post reported.
“This is fundamentally about our values and what kind of country we want to be,” Sen. Elizabeth Warren (D-Mass.) said, according to the Huffington Post. “With college costs exploding and students being crushed by more than a trillion dollars in debt, I believe we should invest in our students — not make obscene profits off them.”
According to the Consumer Financial Protection Bureau (CFPB), of the roughly $1.2 trillion in outstanding student loan debt nationally, nearly $1.1 trillion is now guaranteed by U.S. taxpayers.
I Need a Washington D.C. Bankruptcy Attorney
Unfortunately, student loans are very hard to discharge in bankruptcy—although this may be changing. In a HuffPost column from earlier this year, according to 2012 bankruptcy data, 47 percent of federal student loans were discharged in full, 21 percent resulted in a better payment and 12 percent settled for less than was due in bankruptcy cases.
For many student loan borrowers, a Chapter 7 or Chapter 13 bankruptcy could help even though their student loan debt is nondischargeable, as you can discharge credit card debt, medical bills and unsecured personal loans.
Law Firm of Kevin D. Judd– Maryland and Washington DC bankruptcy attorney
Judd’s Judgment: Almost 60 percent of outstanding federal student debt nationally is from the Direct Loan program.