<p>There’s a lot of ignorance in this thread about credit markets. The DLQ90 rates (delinquency of > 90 days) rates on student loans are 11+%. Claiming ‘pure profit’ of 49 cents on the dollar(impossible) without calculating credit risk on a credit portfolio is asinine. Student loans are more delinquent than CREDIT CARDS(typically around 9% charge off) these days.</p>
<p>The fact of the matter is 3.4 (and even 6.8%) rates for undergrads are insanely low for this kind of portfolio performance. Granted, people shirk their CC responsibility all the time with bankruptcy and student loans are not, the recovery rates on delinquent accounts are roughly comparable due to the time delay in recovery, so the interest rates on student loans should realistically be 12-30%. There is no ‘profit’ at all. </p>
<p>Prior to the Healthcare law, no private lender ever would’ve been giving out this money without the bankruptcy protection (for the lender) and the explicit government backstops on the money. Now the governments the only one who originates unsecured student loans. This is INCREDIBLY subsidized so please stop saying ‘Direct subsidized loans’ is a misnomer.</p>