From November 2013 through November 2014, the aggregate balance in the federal direct student loan program–as reported by the Monthly Treasury Statement–rose from $687,149,000,000 to $806,561,000,000, a one-year jump of $119,412,000,000.
The balance on all student loans, including those from private sources, exceeded a trillion dollars as of the end of the third quarter, according to the Federal Reserve Bank of New York.
The steep rise starting in 2010 can be partly explained by the elimination of the Federal Family Education Loan (FFEL) program, which allowed private lenders to make federally guaranteed student loans.
In 2010, Congress passed and the President signed into law a bill that eliminated the FFEL program for all new loans made as of July 1, 2010. All federal student loans have been made under the Direct Loan program as of that date….
The federal government now “essentially serves as the banker — it provides the loans to students and their families using federal capital (i.e., funds from the U.S. Treasury), and it owns the loans,.
Wealth transfer from taxpayers to colleges and students
The federal student loan program serves as a transfer of wealth to colleges and universities. Rich schools like Harvard enjoy rising endowments while their students receive federal loans.
By doling out a net average of about $100 billion per year in student loans, the federal government allows even the nation’s wealthiest universities to charge students more than they and their families can pay without going into debt.
That makes colleges richer and students poorer.
Students benefit from taxpayer-funded loan forgiveness programs.
“Currently, over 50 loan forgiveness and loan repayment programs are authorized, and at least 30 of which were operational as of October 1, 2013,” says CRS.
When the government forgives or repays a student loan, it becomes a redistribution of wealth from taxpayers to a person who attended college.