...At the same time, the government will lose a small amount of money on direct loans to undergraduates, which make up more than half of its lending operation. While the Department of Education makes a profit on unsubsidized Stafford loans to college goers, it takes a hit on subsidized Staffords that go to low- and middle-income undergrads. When everything shakes out, the programs combine for a 10-year, $3 billion net loss.
...Now back to those grad schoolers. Their loans, which are shown in red and blue below and now make up about one-third of the government’s yearly lending portfolio, are expected to yield almost $113 billion over the 10-year window before admin costs. Once again, that’s three-quarters of the government’s direct lending profit. Graduate students are such lucrative customers because they pay higher interest rates than undergraduates and don’t default all that often. For the government, they’re low-risk, high-reward borrowers.It would be fascinating to know what percentage of the government's student loan profits come from humanities students as opposed to science/engineering types.