Valdosta Daily Times

Community News Network

April 18, 2014

Biggest student loan profits come from grad students

NEW YORK — This week, the Congressional Budget Office projected that the federal government would earn roughly $127 billion from student lending during the next 10 years. That estimate is down a bit from previous figures but is surely high enough to infuriate liberals like Sen. Elizabeth Warren, D-Mass., who tend to regard the idea of a profitable student loan program as fundamentally indecent.

While browsing the CBO's data, however, I noticed something intriguing about those fat-sounding profits: Most of them don't come from undergraduate lending. The Department of Education is really making its killing by loaning money to grad students. And, with all due respect to any disgruntled J.D.s or Ph.D.s reading today, there's really nothing wrong with that.

First, the big picture. Through 2024, the CBO expects our government to rake in a $149 billion profit on new direct loans to students. Grad school lending will generate about three-quarters of those returns, which fall to $127 billion once you subtract administrative expenses and costs associated with the discontinued guaranteed lending program.

At the same time, the government will lose a small amount of money on direct loans to undergraduates, which make up more than half of its lending operation. While the Department of Education makes a profit on unsubsidized Stafford loans to college goers, it takes a hit on subsidized Staffords that go to low- and middle-income undergrads. When everything shakes out, the programs combine for a 10-year, $3 billion net loss.

Now back to those grad schoolers. Their loans, which now make up about one-third of the government's yearly lending portfolio, are expected to yield almost $113 billion over the 10-year window before admin costs. Once again, that's three-quarters of the government's direct lending profit. Graduate students are such lucrative customers because they pay higher interest rates than undergraduates and don't default all that often. For the government, they're low-risk, high-reward borrowers.

Here's where the government is expected to make a bit of money off of undergraduate students: lending to mom and dad. Parent PLUS loans, which are only available to the parents of undergrads, are expected to rake in a bit more than $42 billion over 10 years. Parent loans make up a mere tenth of the total undergraduate portfolio. But again, thanks to low default rates - unlike other student loans, they involve a light credit check - and high interest rates, they yield a nice return for the Department of Education.

               

     

 

1
Text Only
Community News Network
  • Sunburn isn't the only sign of summer that can leave you itchy and blistered

    You've got a rash. You quickly rule out the usual suspects: You haven't been gardening or hiking or even picnicking, so it's probably not a plant irritant such as poison ivy or wild parsnip; likewise, it's probably not chiggers or ticks carrying Lyme disease; and you haven't been swimming in a pond, which can harbor the parasite that causes swimmer's itch.

    July 30, 2014

  • Survey results in legislation to battle sexual assault on campus

    Missouri U.S. Sen. Claire McCaskill joined a bipartisan group of senators Wednesday to announce legislation that aims to reduce the number of sexual assaults on college campuses.

    July 30, 2014

  • An alarming threat to airlines that no one's talking about

    It's been an abysmal year for the flying public. Planes have crashed in bad weather, disappeared over the Indian Ocean and tragically crossed paths with anti-aircraft missiles over Ukraine.

    July 30, 2014

  • Sharknado.jpg Sharknado 2 set to attack viewers tonight

    In the face of another "Sharknado" TV movie (the even-more-inane "Sharknado 2: The Second One," premiering Wednesday night on Syfy), there isn't much for a critic to say except to echo what the characters themselves so frequently scream when confronted by a great white shark spinning toward them in a funnel cloud:
    "LOOK OUT!!"

    July 30, 2014 1 Photo

  • 20140729-AMX-GIVHAN292.jpg Spanx stretches into new territory with jeans, but promised magic is elusive

    The Spanx empire of stomach-flattening, thigh-slimming, jiggle-reducing foundation garments has expanded to include what the brand promises is the mother of all body-shaping miracles: Spanx jeans.

    July 29, 2014 1 Photo

  • Medical marijuana opponents' most powerful argument is at odds with a mountain of research

    Opponents of marijuana legalization are rapidly losing the battle for hearts and minds. Simply put, the public understands that however you measure the consequences of marijuana use, the drug is significantly less harmful to users and society than tobacco or alcohol.

    July 29, 2014

  • linda-ronstadt.jpg Obama had crush on First Lady of Rock

    Linda Ronstadt remained composed as she walked up to claim her National Medal of Arts at a White House ceremony Monday afternoon.

    July 29, 2014 1 Photo

  • Can black women have it all?

    In a powerful new essay for the National Journal, my friend Michel Martin makes a compelling case for why we need to continue the having-it-all conversation.

    July 29, 2014

  • Dangerous Darkies Logo.png Redskins not the only nickname to cause a stir

    Daniel Snyder has come under fire for refusing to change the mascot of his NFL team, the Washington Redskins. The Redskins, however, are far from being the only controversial mascot in sports history.  Here is a sampling of athletic teams from all areas of the sports world that were outside the norm.

    July 28, 2014 3 Photos

  • 'Rebel' mascot rising from the dead

    Students and alumni from a Richmond, Va.-area high school are seeking to revive the school's historic mascot, a Confederate soldier known as the "Rebel Man," spurring debate about the appropriateness of public school connections to the Civil War and its icons.

    July 28, 2014

Top News
Poll

Do you agree with the millage rate increases?

Yes. We need to maintain services
No. Services should have been cut.
     View Results