I once was chastised on Twitter about student loans as the author claimed there was no cost to forgive all loans as the money came from the Department of Education. Oh my‼️
Time to Get Serious About Student Loans.
As we’ve explained before, blanket debt cancellation would be a big mistake. Extending the current student debt pause isn’t a form of inaction; it’s debt cancellation by another name. And as we’ve shown before, it’s even more regressive than cancelling $10,000 per person.
As the Department of Education continues to issue $85 billion a year of new loans, failure to collect on existing loans threatens the integrity of the entire program while adding to federal costs and worsening inflationary pressures.Committee for a Responsible Federal Budget
Currently the federal government loses money on student loans because of the repayment pause and interest waiver.
Federal student loans are funded by issuing U.S. Treasuries, which is money borrowed from investors. The federal government must pay interest on the U.S. Treasuries. So, part of the interest that borrowers pay covers the cost of the funds that are used to make the loans. There’s also a fee paid by the U.S. Department of Education to the U.S. Department of the Treasury to cover the cost of issuing and administering the U.S. Treasuries.Source: https://thecollegeinvestor.com/39673/does-the-government-profit-off-of-student-loans/
In other words federal student loans are funded by new debt, currently to the tune of $85 billion per year.