The U.S. Department of Education says it has been working to help borrowers who are struggling under the weight of crushing student loan debt. But as Washington focuses on reducing annual federal budget deficits, the huge profits off those same borrowers may prove too alluring for Education Secretary Arne Duncan.
In the fiscal year ending Sept. 30, his department reaped more than $42.5 billion in profit from federal student loans, according to federal budget documents. That total was roughly a third higher than in 2012 and the agency’s second-highest ever profit haul after a $47.9 billion gain in 2011, according to a Huffington Post analysis. The Education Department confirmed the 2013 profit figure.
Had Congress and President Barack Obama not agreed over the summer to temporarily lower student loan interest rates, the Education Department’s 2013 profits would have been about $8 billion higher, according to the Congressional Budget Office, and they would have set a new record.
In a sign of just how important student loan profits have become for the Education Department’s bottom line, its reported gains off lending to students and their families over the last year comprised nearly half of the agency’s total outlays, the biggest share since at least 1997.
By effectively subsidizing half of the department’s total operations — spending that encompasses programs ranging from early childhood learning to aid for colleges — the profits have enabled Duncan to reduce his agency’s total cost to U.S. taxpayers to the smallest amount since 2001.