Students at Pasadena City College in Pasadena, California attend their 2019 graduation ceremony.
Robin Beck/AFP via Getty Images
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Robin Beck/AFP via Getty Images
Students at Pasadena City College in Pasadena, California attend their 2019 graduation ceremony.
Robin Beck/AFP via Getty Images
BUT new report from the US Government Accountability Office believes that the US Department of Education miscalculated the cost of the federal student loan program.
The Department of Education estimates that from 1997 to 2021, federal direct student loan payments will bring the government 4 billion.
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But the GAO found that, as of 2021, the program is actually Price the government estimated at $197 billion.
Part of that shortfall, $102 billion, is due to the unprecedented pause in federal student loan repayments that began under the CARES Act in 2020. The pause has been extended several times under former President Trump and President Biden. The most recent extension is valid until August 31st.
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The report says a more serious reason for the $311 billion difference is that the original projections did not take into account the high percentage of borrowers who ended up enrolling in income-driven repayment (IDR) plans. About half of all direct loans are now repaid through these plans, which are designed to help people who can’t afford to make large monthly payments and promise to cancel the loan in 20-25 years.
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The GAO explains that “the monthly payment amount for borrowers in income-based repayment plans may vary depending on their economic status.” This is one of the many reasons why government spending on the program has been unpredictable.
IDR has also failed to deliver on its promise to borrowers: a recent NPR investigation found that these plans were poorly managed by lenders and the Department of Education. As a result, a relatively small number of borrowers were able to cancel their loans through IDRs.