Brian Wesbury explains the potential implications of the president’s idea and discusses how the administration is giving people incentives not to work on “Making Money”
The Department of Education has significantly understated the cost of the federal student loan program and will likely lose $197 billion in loans it has made over the past 25 years, according to a government report released Friday.
The federal watchdog said that from 1997 to 2021, the department estimated the student loan program would generate about $114 billion when it actually lost billions because of revised assumptions about borrowers and repayments related to pandemic policy changes that have affected the program and the expansion of a popular plan that ties repayment to the borrower’s income.
The department’s estimates differ by about $311 billion.
One of the biggest factors contributing to the deficit is the federal moratorium on student loan payments that began under former President Donald Trump as part of a massive COVID-19 relief package. President Biden repeatedly extended the payments freeze when he took office and faces mounting pressure from progressive lawmakers to do so again when the freeze expires in August.
US ECONOMY ENTERS TECHNICAL RECESSION AFTER GROWING 0.9% IN SECOND QUARTER
Georgetown University graduates pose for graduation photos early as the school transitions to online-only classes due to the coronavirus outbreak on Wednesday, March 18, 2020. (Photo by Tom Williams/CQ-Roll Call, Inc via Getty Images / Getty Images)
Freezing payments, keeping interest rates at 0 percent and halting delinquent loan collections added an additional $102 billion in costs to the Department of Education program, according to the GAO report.
The analysis comes amid a raging debate in Washington over whether Biden should cancel any of the $1.6 trillion in federal student loan debt held by millions of Americans.
The GAO conducted the analysis at the request of several Republican lawmakers, including Sens. Richard Burr of North Carolina and Mike Brown of Indiana, as well as Representatives Virginia Foxx of North Carolina and Greg Murphy of North Carolina. They said the report was proof that “taxpayers have lost hundreds of billions of dollars under this program.”
“For decades, the Department of Education has significantly understated the true cost of the Direct Loan program,” it said in a statement. “Today’s GAO report shows that the Department’s budget has been cut by more than $300 billion – all of which will be paid for by hardworking American taxpayers.”
President Joe Biden speaks about the economy and the final rule implementing the US bailout program protecting multiemployer pension plans at Max S. Hayes High School in Cleveland, Ohio, July 6, 2022. (Photo by Saul Loeb/ AFP via Getty Images) / Getty Images)
The report shows that since 1997, the federal program has lost money on loans issued in every fiscal year except one. The Department of Education previously projected it would generate about $6 in revenue per $100 in loans.
Overall, the GAO said the report cost taxpayers about $200 billion.
About half of the loans in the federal program are repaid through income-driven repayment plans.
“While the Department always strives for the best possible estimates, there is some uncertainty in the Department’s cost estimates,” Department of Education Deputy Secretary James Quall wrote in a letter included in the GAO report.
Add Comment