With $1.4 trillion in outstanding student loan debt, student loans are a huge issue in the United States. 7 in 10 graduates now graduate with student loan debt as a result of rising higher education costs.
The price of higher education has increased at a greater pace in comparison to wages, consumer prices, and housing prices. Keeping up with the costs of higher education is difficult and more students are turning to student loans. Student loans can be a blessing and a curse.
Both federal student loans and private student loans can help students who may not have been able to afford college otherwise. On the other hand, you have large companies like Sallie Mae profiting from the $1.4 trillion in outstanding student loan debt.
Taking a Look at Sallie Mae’s Annual Report
Here at LendEDU we thought it would be interesting to look at Sallie Mae’s most recent annual report. You may be surprised to know that Sallie Mae is actually a public company with a market capitalization of $4 billion. The company is required to release all of its financial statements for investors. We were surprised with what we found.
In 2013, Sallie Mae generated revenue of $6.2 billion with profits of $1.42 billion!
Not bad. Education loan balances have skyrocketed over the past decade. In the first quarter of 2005, outstanding student debt stood at $363 billion — about a third of the current level, based on a 2013 New York Fed report. Sallie Mae is certainly benefiting from the increased dependency on student loans. Should Sallie Mae’s profits rise as students struggle to make their student loan payments?
Where Are These Profits Going?
Back to shareholders. Sure. Shareholders have a right to earn a return on investment. That being said, how much is too much?
That is why here at LendEDU we work with lenders who have the borrowers best interest in mind. One of our lender partners, LendKey, offers private education loans and student loan consolidation (the act of combining two or more student loans together with a private lender – often used to get a lower interest rate or shorter repayment term) just like Sallie Mae. But with LendKey, all the profits generated by the credit union are given back to the members, not shareholders.
>> Read More: Refinance student loans
Author: Dave Rathmanner
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