![]() ![]() The “cost” conservatives speak of is actually lost revenue from the payments borrowers would be making on a monthly basis absent relief. If federal student loans were canceled via executive order today, the government won’t cut itself a trillion-dollar check to wipe away the debt on the national ledger.Ĭlaims of student debt cancelation being “expensive” are misleading, perhaps intentionally so. ![]() This system, for all practical purposes, has turned the DoE, which directly owns and manages about $1.5tn in student loans, into one of the largest banks in the US, behind Wells Fargo and Citigroup.īecause overseeing all these loans is an enormous administrative undertaking, the DoE pays third-party contractors like Nelnet – a publicly-traded company with an estimated net worth of more than $3bn – to help service these loans. The DoE subtracts the difference and keeps the “profit” to pay for administrative costs and the servicing of those loans. The interest that borrowers pay exceeds the Treasury’s interest rates. That’s because when student loan borrowers pay back their debts, they pay interest on the loan. The Urban Institute notes that while the national debt increases, the federal deficit decreases modestly as student loans are repaid. Put another way, it was the creation of student loans that has added over a trillion dollars to the national debt. This additional debt is added when the Treasury lends money to the DoE. It borrows money from the US Treasury (the federal department that prints money) and then lends that money to students.Īs the Urban Institute points out, federal student loan debt is already accounted for in the national debt. The Department of Education (DoE) does not lend money to students directly. That’s because federal student loan debt is already included in the national debt. These conservative cliches have flooded editorials in leading news outlets in recent months.īut if Joe Biden signed an executive order tomorrow, the government won’t pay out a dime and those costs certainly don’t have to be shouldered by everyday taxpayers at the expense of programs like Medicare or social security.
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