Government Student Loan Profiteering

8/28/13
 
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from NCPA,
8/28/13:

In late May President Barack Obama warned that unless Congress took action soon, the relatively low 3.4 percent interest rates on key federal student loans would double, says Matt Taibbi of Rolling Stone Magazine.

The Republicans and Democrats are snuggled in bed together on student loans, having hatched a quick-fix plan on July 31st to peg interest rates to Treasury rates, ensuring the rate for undergrads would only rise to 3.86 percent for the coming year.

The Congressional Budget Office projections predicted interest rates on undergraduate loans under the new plan would still rise as high as 7.25 percent within five years, while graduate loans could reach an even higher 8.8 percent.

While it’s not commonly discussed on the Hill, the government actually stands to make an enormous profit on the president’s new federal student loan system — an estimated $184 billion over 10 years, a boondoggle paid for by hyper-inflated tuition costs and fueled by a government-sponsored predatory-lending program that makes even the most ruthless private credit-card company seem like a “Save the Panda” charity. Why is this happening? The answer lies in a marriage of private-sector greed and government force.

Between 1950 and 1970, sending a kid to a public university cost about 4 percent of an American family’s annual income. Forty years later, in 2010, it accounted for 11 percent. Showing tuition and fees rising 300 percent.

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