Critics blasted the U.S. Department of Education for profiting off the backs of struggling students after a new projection by the Congressional Budget Office revealed Monday that the federal agency is set to make $127 billion from loan interest payments over the next ten years.
And despite promises to do the opposite, a student loan bill signed into law last year is driving up those interest rates even faster than projected, an internal government watchdog reports.
“This exploding debt is crushing our young people,” said Senator Elizabeth Warren (D-Mass.) on Saturday, speaking at a student loan symposium at Suffolk University's law school in Boston. Warren was one of the few lawmakers who last year voted against the passage of the loan bill.
“These students didn’t go to the mall and run up a bunch of charges on credit cards," Warren continued. "They worked hard to learn new skills that will benefit this country. [...] They deserve our support, not an extra tax for trying to get an education.”
According to the Huffington Post, reporting on the new estimates:
Beginning in 2015, the average undergraduate borrower will pay 5.72 percent to borrow from the federal government, the budget office estimates. Graduate borrowers are forecast to pay at least 7.27 percent, while parents will pay 8.27 percent.
All three rates are higher than what borrowers paid in the 2012-13 academic year—the last year before Congress changed the law.
Further, these higher borrowing costs come at least a year sooner than projected last summer when the bill was signed into law. At the time, the Obama administration touted the new rule as a "win for students," saying the student loan law would "keep student loan interest rates low this year."
“This is a profit-making machine for the Education Department,” Chris Hicks, who leads the Debt-Free Future campaign for Jobs With Justice, told Huffington Post.
Hicks added that average estimated annual profit of $12 billion demonstrates that the federal student loan program is charging borrowers way too much: "The student loan program isn’t about helping students or borrowers—it’s about making profits for the federal government."
U.S college graduates now owe over $1 trillion and, according to the Project on Student Debt, 7 out of 10 graduating college seniors owe an average of $29,400.