U.S. Senator Brian Schatz (D-Hawai"i) today called a new Government Accountability Office (GAO) report detailing the U.S. Government's $66 billion profit on federal student loans originated between 2007-2012 troubling and said it shows that the federal government needs to do more to reduce student loan debt and make college more affordable.
"Federal policy should be geared towards making college more affordable, not reaping billions of dollars in profits off students who are racking up student loan debt," said U.S. Senator Brian Schatz. "I was glad to join President Obama in the Oval Office this summer when he signed legislation to prevent student loan rates for undergraduates from doubling. But it's the growing principal more than the interest that is driving students into debt due to the escalating cost of college. The federal government needs to use our resources to hold colleges accountable and bring down the price students and families pay, instead of profiting off them. That's why I introduced the College Affordability and Innovation Act with Chris Murphy, to create new accountability standards and encourage innovation to bring down the cost of college for students."
The GAO report follows projections released by the Congressional Budget Office (CBO) estimating that the federal government will bring in an additional $185 billion in profits on new student loans made over the next ten years. In the last 30 years, the cost of college has increased by 300 percent, forcing some students to take on crushing student loan burdens or putting a degree entirely out of reach for others. More than a third of Hawai"i's students take on an average of $17,447 in student loan debt.
To address the rising cost of higher education, Senators Schatz authored the College Affordability and Innovation Act with Senator Chris Murphy (D-Conn.), and they introduced the legislation last week along with Senators Patty Murray (D-Wash.) and Bernie Sanders (I-Vt.). The legislation would bring down the cost of college through new accountability standards and an innovation pilot program.
As of May 2013, total outstanding student loan debt in the U.S. topped $1.2 trillion. Among students who are in repayment on those loans, over 30% are more than 90 days late on their repayments. For hundreds of schools, student default rates are higher than their graduation rates.