Student Loans Cost the Government Billions of Taxpayer Dollars.

The lie. The truth. And the cover-up.

(Image credit: Foundation for Economic Education)

In yesterday’s article, I wrote that cancelling student loan debt, even just at the $10,000 level, might actually save the government money in the long run. The reason is that the government loses money by servicing student loan debt.

Let that sink in for a minute.

The government, an entity with an uncanny knack for bringing in revenue through taxes (well, when it wants to), is losing money by giving out loans, which are legally binding contracts to pay the government back, with interest.

How the hell is this happening, and why don’t we hear more about it?

How Student Loans Lose Money

On the surface, student loan look like a solid business case.

1. Lend students money to attend college.
2. The student graduates, earning higher lifetime earnings with lower unemployment rates than non-graduates.
3. Reap the profit during the payback period.

That would be a great plan if everything went according to plan. But it doesn’t.

Life Happens