NEW YORK ( MainStreet) — Is the Department of Education mainly carrying out mandates to establish and administer federal assistance to education while enforcing educational laws on privacy and civil rights?
Or is it a business that is pulling in huge amounts of cash?
According to reports in Monday's Detroit Free Press and USA Today, the ED made enough on student loans last year to hand out Pell Grants of $5,645 each to 7.3 million college students.
These reports claim that being a government entity didn't prevent the ED from acting like a for-profit operation. While the $41.3 billion profit for the 2013 fiscal year reported by these publications is down $3.6 billion from the previous year, it's a higher profit level than all but two companies in the world: Exxon Mobil, which cleared $44.9 billion in 2012 and Apple, which made $41.7 billion.
Arne Duncan, Secretary of Education, having been down this road before, has begged to differ.
"It's actually neither accurate nor fair to characterize the student loan program as making a profit," Duncan said during a July conference call with reporters after the Free Press and other news organizations reported on profits made from student loans.
Duncan has a point. Similar numbers were heard last August about the money the ED makes from Senator Elizabeth Warren (D-Mass.), who suggested that the ED was turning a $51 billion profit, a number that was shot down—although not to everyone's satisfaction--by Washington Post blogger Glenn Kessler.
Predicting the value of the loans and how much the Department makes from them is tricky; opacity does indeed reign. The 1990 Credit Reform Act determines how the government accounts for student loans. The ED counts the cash outflows as the loan payout—the disbursement of the loan. Cash inflows are the loan payback including principal plus interest and fees, less any amount that the borrower stiffs Uncle Sam. Delinquencies and defaults can be wildest of wild cards.
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