When President Obama ultimately signed the Health Care and Education Reconciliation Act -- one of the two bills comprising Obamacare -- he gave a speech celebrating one of its surprises: language that terminated the Federal Family Education Loan (FFEL) program that allowed federally guaranteed student loans to be made in the private sector with private capital, thus giving the Federal Direct Student Loan (DL) program a monopoly over these loans.
As the Congressional Research Service has put it, this program makes the U.S. Treasury a "banker" for college students.
"The DL program uses a different administrative structure and draws on a different source of capital than was used in the FFEL program," said a CRS report published on March 4. "Under the DL program, the federal government 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."
For Obama, this was the perfect arrangement -- allowing what he described as a redistribution wealth from banks to college students.
"For almost two decades, we've been trying to fix a sweetheart deal in federal law that essentially gave billions of dollars to banks to act as unnecessary middlemen in administering student loans," Obama said when he signed the bill at Northern Virginia Community College. "These are billions of dollars that could have been spent helping more of our students attend and complete college, that could have been spent advancing the dreams of our children, that could have been spent easing the burden of tuition on middle-class families. Instead, that money was spent padding student lenders' profits."
Last week, speaking at the Conservative Political Action Conference, Sen. Marco Rubio, who said he had just finished paying off more than $100,000 in student loans, presented a far different picture of the program.
"You should be very concerned about student loan debt," he said. "It is the next big bubble in America."
So, now that the U.S. Treasury is the banker for the federal student loan program, what is happening with student-loan debt?
The hard numbers can be found in the Monthly Treasury Statements (MTS). Table 6, Schedule E in these statements lists the account balances for federally guaranteed and direct loan programs.
In January 2000, according to the MTS, the balance of the Federal Direct Student Loan program was $51.643 billion. Over the next eight years, that nearly doubled, rising to $101.682 billion in January 2008.