Yet the temporary relief will come to an end in coming years, as rates are expected to rise. Gains off loans in 2013 comprised nearly half of the Education Departments total outlays, the biggest share since at least 1997. Effectively subsidizing half of the agency’s total operations, the profits have enabled Sec. Duncan to reduce the Education Departments total cost to the smallest amount since 2001. The Education Department spent $40.9 billion in 2013, nearly a third less than 2012 and the lowest reported amount since the first year of George W.
The loans, which were taken out between 1990 and 1998, are likely to be sold for significantly lower than their market rate. Universities Minister David Willetts announced plans to sell the loans in March, saying the “mortgage-style” student loans will “allow us to reduce public debt and maximise the value of one of the government’s assets. A fresher at Manchester university browses books at a secondhand stall. Student loans from 1990 to 1998 will be sold to a private debt collection agency on Monday “The private sector’s expertise makes it well placed to collect this debt and the sale will also help the Student Loans Company to concentrate on providing loans to current students.” Many whose loans will be included in the sell-off took to Twitter on Sunday evening to voice concern about the plans to sell the loans to a debt collection agency. I wish there was a way I could stop them selling off the student loan book, it’s lunacy.
| Johnny Green/PA Archive Get UK Politics Newsletters: Student News , Business , Bis , Government Debt , Money , Nus , Student Loans , Student Money , UK Politics News Student loans taken out between 1990 and 1998 and worth 890m have been sold to a private company for 160m, the government has confirmed, in a highly controversial decision. The head of the National Union of Students (NUS) has slammed the move as “ridiculous” and “extremely concerning”, while the government insists the sale represents “good value for money”. Selling Off the Loan Book Would Be the Government’s Most Outrageous Attack on Students, So Why Aren’t the NUS More Concerned? A company called Erudio Student Loans was named as the successful bidder on Monday, and now owns the remaining 17% of mortgage style student loans taken out by those who began courses between the eight year period. Universities and Science Minister David Willetts said the price paid exceeds the estimated value of the remaining student loans, and added the private sector is “best placed” to collect the remaining debts. The sale of the remaining mortgage style student loan book represents good value for money, helping to reduce public sector net debt by 160m,” he said.
Government books $41.3 billion in student loan profits
“When students graduate from college, traditionally they will make less. And then as they progress in their professional career they’ll earn more. The repayment schedule should follow this trend so that borrowers pay less early on and more as they earn more.” Get more U.S. News coverage of the Top World Universities . Also on HuffPost: 75% of students have debt 2.
Among the issues being looked at are the student loans programs, according to Allison Preiss, press secretary for Democratic Sen. Tom Harkin of Iowa, who heads the committee. ‘Profit’ depends on accounting method Projecting how much money the government will make – or have to pay in a subsidy – on those loans is a tricky, complex formula, based on a variety of factors, experts said. The federal Credit Reform Act of 1990 set the way the government has to account for its loans. It measures the cash outflow as the disbursement of the principal loan amount and the inflowing money as the payments of interest and principal, minus amounts not paid, plus any fees the government receives from the borrower. But there are those who say this is a bad way to measure and predict what loans cost the government.
The disposal, to a debt recovery specialist, will be for a fraction of the debts’ continue face value, and encompasses mortgage-style loans that are the last of their kind still in public ownership. The sale, which does not include Income Contingent Repayment loans like the ones currently offered, comes as student groups step up their protest over the disposal of the loan portfolios. The coalition is drawing up plans to sell the entire outstanding student loan-book, which has a face value of roughly 40bn. Investment bankers from Barclays and Rothschild were appointed by the Department for Business, Innovation and Skills (BIS) last month to oversee the sale, which more than 15,000 people have signed an online petition to oppose. Danny Alexander, the chief secretary to the Treasury, said during the summer that the Government hoped to raise 10bn from the sale of corporate and financial assets such as the student loan book by 2020. David Willetts said the sale would help balance the nation’s books Speaking in March, when the mortgage-style student loan auction was initiated, David Willetts, the universities and science minister, said: “Selling the remaining mortgage-style student loans will allow us to reduce public debt and maximise the value of one of the Government’s assets.
Gov’t Shows $41.3 Billion in Student Loan Profits
“The administration has taken steps to improve college affordability, and thanks to collective efforts, students and families are paying lower rates on their loans today than they would have otherwise,” Stephen Spector, U.S. Department of Education spokesman said in an e-mail to the Free Press. “More must be done to bring down the cost of college, and we look forward to continuing to work with Congress, institutions, borrowers, and other stakeholders to make college more affordable.” The numbers track the entire fiscal year that ended Sept. 30. They come as concern continues to mount about the level of indebtedness by college students and graduates. Estimates show more than $1.2 trillion in student loan debt across the nation, more than the nation owes on credit cards.