headermask image

header image

Are student loans a profit center for the government?

Melissa Korn at the WSJ has a killer lead in today’s story:

Defaulting on federal student loans may not be such a bad thing–at least, not for the federal government.

She notes that after all of the costs for the loan sharking and wage garnishing, the government still nets 85% of the money that’s missing after the loans go into default. Given that the government also collects relatively high interest rates from the people who do pay, old Uncle Sam may be doing well by appearing to do good.

As Ms. Korn astutely points out, this changes the debate about the for-profit colleges. Maybe they’re doing old Uncle Sam a favor by suckering more kids into shouldering the big debt.

Share

Related posts:

  1. Is the US government in denial?
  2. U.S. Government to Nationalize Loan Biz
  3. Private loans skyrocket
  4. Federal Government boosts Grants
  5. New rules do little to reign in bad student loans

If you liked my post, feel free to subscribe to my rss feeds

Money Making Options

Post meta

This entry was written by admin and posted on January 5, 2011 at 12:57 pm and filed under Uncategorized. Bookmark the permalink. Follow any comments here with the RSS feed for this post. Both comments and trackbacks are currently closed.

Share with others

Post Are student loans a profit center for the government? to digg. Post Are student loans a profit center for the government? to Reddit add to stumbleupon Google Bookmark myweb bookmark on del.cio.us newsvine Tailrank magnolia Furl co.mments shadows simpy blinklist

One Comment

  1. What’s ironic about this is that the shift to Direct Loans from FFELP was sold to Congress as a cost-saving measure — and included in Obama-Care as such.

    FFELP guarantors (state agencies and others) were profiting from defaults, receiving a small-kick back, before the Direct Loan program cut them off. Student loan providers also earned profits, of course. The savings were apparently $18 billion over the life of the program once FFELP was ended, used to off-set the cost of health care reform. So, it is truly ironic that this continues to be a profit center for the federal government.

    1. Higby on January 8th, 2011 at 1:29 am