Federal Student Loan Debt Tops $800 Billion
December 31, 2014 – 12:37 AM
By Terence P. Jeffrey
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Statue of George Washington stands near the University of Texas Tower in Austin, Texas. (AP Photo)
From November 2013 through November 2014, the aggregate balance in the federal direct student loan program–as reported by the Monthly Treasury Statement–rose from $687,149,000,000 to $806,561,000,000, a one-year jump of $119,412,000,000.
The balance on all student loans, including those from private sources, exceeded a trillion dollars as of the end of the third quarter, according to the Federal Reserve Bank of New York.
“Outstanding student loan balances reported on credit reports increased to $1.13 trillion (an increase of $8 billion) as of September 30, 2014, representing about $100 billion increase from one year ago,” the bank said in its latest report on household debt and credit.
Seven years ago, in November 2007, the aggregate balance in the federal direct student loan program was only $98,529,000,000. Since then, it has grown by $708,032,000,000.
This is money that young Americans owe the federal Treasury–and that gives the federal government leverage over their lives.
“Under the DL program, the federal government essentially serves as the banker — it provides the loans to students and their families using federal capital (i.e., funds from the U.S. Treasury), and it owns the loans,” explains the Congressional Research Service.
In fact, the program is a government-funded redistribution of wealth to colleges and universities. The question is: Who will ultimately pay for that wealth transfer?
In 2013, the National Center for Educational Statistics published a study of student aid in the 2011-2012 school year. It showed that 40.2 percent of students attending a postsecondary school had a federal student loan.
The percentages were higher for full-time students and those who attended four-year colleges. Fifty-five percent of students attending college full-time had a federal loan, 58.1 percent of those attending a four-year doctorate-granting institution had a federal loan, and 61.4 percent of those attending a four-year non-doctorate granting institution had a federal loan.
The average amount of a federal student loan during that school year was $6,500.
In 2012, according to the National Association of College and University Business Officers, the University of Texas System had an endowment of $18,263,850,000 — the largest of any state university system. In 2013, that endowment grew 12 percent — or $2,184,463,000 — to hit $20,448,313,000.
Yet, according to the College Board, an in-state student attending the University of Texas at Austin during this school year will pay $26,324 in total costs (including $9,798 in tuition; $11,456 in room and board; $760 for books; $2,280 in personal expenses; and $1,490 in transportation expenses).
The “average indebtedness at graduation” of a University of Texas student is $25,300, says the College Board. This is “the typical amount of loan money a student who attended this college must pay back.” (The College Board does not specify how much of that indebtedness is owed to the federal government.)
In 2012, according to NACUBO, Harvard had an endowment of $30,435,375,000 — the largest of any American university.
In 2013, that endowment grew 6.2 percent — or $1,898,918,000 — to $32,334,293,000.
Yet, according to the College Board, the cost of attending Harvard this year is $62,250 (including $43,938 in tuition, $14,669 in room and board, $1,000 for books and supplies and $2,643 in personal expenses). The “average indebtedness at graduation” of a Harvard student is $12,560.
By doling out a net average of about $100 billion per year in student loans, the federal government allows even the nation’s wealthiest universities to charge students more than they and their families can pay without going into debt.
That makes colleges richer and students poorer.
The federal government already has programs in place to forgive or payoff the student loans of Americans who engage in government-approved activities, or who do not do well enough financially in their after-college years to pay off their own loans.
“Loan forgiveness and loan repayment programs,” says the Congressional Research Service, “typically are intended to support one or more of the following goals: Provide a financial incentive to encourage individuals to enter public service. Provide a financial incentive to encourage individuals to enter a particular profession, occupation, or occupational specialty. Provide a financial incentive to encourage individuals to remain employed in a high-need profession or occupation — often in certain locations or at certain facilities. Provide debt relief to borrowers who, after repaying their student loans as a proportion of their income for an extended period of time, have not completely repaid their entire student loan debt.”
“Currently, over 50 loan forgiveness and loan repayment programs are authorized, and at least 30 of which were operational as of October 1, 2013,” says CRS.
When the government forgives or repays a student loan, it becomes a redistribution of wealth from taxpayers to a person who attended college.