The U.S. government underestimated the cost of the student loan program by billions

[Dalek]

The U.S. government underestimated the cost of the student loan program by billions

The Education Department originally thought the student loan program would make money — instead, it's losing it. That's according to a new report from the U.S. Government Accountability Office.

www.npr.org

A new report from the U.S. Government Accountability Office finds the U.S. Department of Education miscalculated the cost of the federal student loan program.

From 1997 to 2021, the Education Department estimated that payments from federal direct student loans would generate $114 billion for the government. But the GAO found that, as of 2021, the program has actually cost the government an estimated $197 billion.

A percentage of that shortfall, $102 billion, stems from the unprecedented federal student loan payment pause 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 runs through Aug. 31.

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A bigger reason for the $311 billion difference, the report says, is that initial predictions did not account for the high percentage of borrowers who ended up enrolling in income-driven repayment (IDR) plans. About half of all direct loans are now paid through these plans, which are designed to help people who can't afford to make large monthly payments and which promise loan cancellation after 20-25 years. The GAO explains, "the monthly payment amount for borrowers in Income-Driven Repayment plans can change based on their economic situation." It's one of many reasons government costs around the program have been unpredictable.

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IDR has also failed to live up to its promise to borrowers: A recent NPR investigationrevealed that these plans have been badly mismanaged by loan servicers and the Department of Education. As a result, relatively few borrowers have actually succeeded in having their loans canceled through IDR.

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[El Bombastico]

Its almost as if its all a fucking scam...

 

[Mandos]

It's almost as if things would benefit from cancellation

 

[RailWays]

It's almost as if things would benefit from cancellation

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Yep

 

[Mandos]

Yep

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In fact I wonder if them publishing this report is setting the ground for justification of cancellation

Edit I get it I kinda misread it but I also meant it in the program needs an overhaul as it's not benefiting anyone but the schools way

 

[5taquitos]

In fact I wonder if them publishing this report is setting the ground for justification of cancellation

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Don't give me hope

 

[Lev]

Haha, I've always said that the taxpayers were footing the bill for federal student loans, but with this news, it seems to be more than just the initial investment, given this new fact about how little students are able to pay back their loans.

 

[Nepenthe]

$300 billion of that gap is literally because they overestimated borrowers' ability to pay back.

Riveting.

 

[Diablos]

Student loans royally fucked generations of people. It's insane.

 

[Castamere]

It's past time for federal regulation of colleges, what they charge, they courses they teach, what we allow loans to be used on, and actually getting people help with finding jobs in those fields after they graduate.

 

[Digital Dinosaur]

It's almost as if for-profit education took the government for a ride, and left the government (as a lender) to ruin the lives and futures of all the people who were walked into taking out loans that they'd never be able to pay off.

 

[ZeroMaverick]

It's almost as if things would benefit from cancellation

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Wouldn't that drastically increase the cost?

Edit: Well, I guess it would be a one-time drastic increase?

 

[The Adder]

It's almost as if things would benefit from cancellation

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This is literally saying the opposite.

 

[just_myles]

Its almost as if its all a fucking scam...

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Yup. Instrument of debt.

 

[808s & Villainy]

It's almost as if things would benefit from cancellation

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I support cancellation, but no, that the exact opposite of what this is saying.

The main issue is the cost of schools massively increasing because schools know that they can charge significantly more for tuition because students largely get loans. It's similar to how hospitals charge a ton because they know most people have insurance

 

[Capra]

I feel like this deserves a "Gru outlining his plan" meme but I don't have the energy to come up with one right now

 

[ZeroMaverick]

To me, this almost reads like it was released in order to give Biden an excuse to resume payments and take away IDR. It's an argument for removing IDR options, in my opinion. Over the course of 24 years, the federal government collected a debt owed to them. That cost them $197 billion. It's not a good look.

 

[Crayolan]

It's almost like letting colleges inflate their costs way beyond what is necessary is a bad idea.

 

[skullmuffins]

It's almost as if things would benefit from cancellation

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How do you figure? Unless you mean better for the borrowers, which, duh.

so the program's lost ~$200 billion over 24 years. $10k of cancellation per borrower will cost the government $375 billion all at once. Bump that up to $50k and it costs a trillion dollars. Total federally held student debt is $1.6 trillion. And even if you do a one-time forgiveness, you still have every future borrower to deal with so it's not actually solving the problem.

 

[El Bombastico]

To me, this almost reads like it was released in order to give Biden an excuse to resume payments and take away IDR. It's an argument for removing IDR options, in my opinion. Over the course of 24 years, the federal government collected a debt owed to them. That cost them $197 billion. It's not a good look.

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Take away IDR and no Millennial or Zoomer is EVER buying a house. Hell, most of them would struggle to lease a fucking car...

 

[ZeroMaverick]

so the program's lost ~$200 billion over 24 years. $10k of cancellation per borrower will cost the government $375 billion all at once. Bump that up to $50k and it costs a trillion dollars. Total federally held student debt is $1.6 trillion. And even if you do a one-time forgiveness, you still have every future borrower to deal with so it's not actually solving the problem.

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Yep.

 

[Plinko]

How much is the defense budget each year?

 

[Senator Toadstool]

To me, this almost reads like it was released in order to give Biden an excuse to resume payments and take away IDR. It's an argument for removing IDR options, in my opinion. Over the course of 24 years, the federal government collected a debt owed to them. That cost them $197 billion. It's not a good look.

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Anyone who takes away IDR is dooming the economy

 

[Deleted member 24052]

Cancel the debt. Money is fake.

 

[ZeroMaverick]

Take away IDR and no Millennial or Zoomer is EVER buying a house. Hell, most of them would struggle to lease a fucking car...

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I don't think Biden or Dems would ever do that, but I could absolutely see the argument. If the program is costing that much over 24 years, it's only going to continue to snowball as more people go to college. The solution to this issue is probably something unimaginable-- like federal regulation of university pricing, federally funded universities that offer direct career paths, or pulling out completely and ending the Direct Loans program.

 

[Surakian]

To me, this almost reads like it was released in order to give Biden an excuse to resume payments and take away IDR. It's an argument for removing IDR options, in my opinion. Over the course of 24 years, the federal government collected a debt owed to them. That cost them $197 billion. It's not a good look.

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Do that and you might as well call it the Endless Depression because everybody will either start defaulting on their loans en masse or spending will grind to a halt.

 

[El Bombastico]

Anyone who takes away IDR is dooming the economy

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I don't think Biden or Dems would ever do that, but I could absolutely see the argument.

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I can totally see a future GoP president trying to do it. "Bootstraps!" remember?

 

[Deleted member 43]

It's almost as if things would benefit from cancellation

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As much as I support cancellation, that's a shockingly poor reading of this report.

 

[ZeroMaverick]

Do that and you might as well call it the Endless Depression because everybody will either start defaulting on their loans en masse or spending will grind to a halt.

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To be clear, I'm in no way advocating for this to happen.

 

[-Peabody-]

Losing IDR would literally destroy my ability to live so I really hope they don't go down the route of getting rid of it.

It would also be suicide for the democrats before midterms.

 

[Senator Toadstool]

I can totally see a future GoP president trying to do it. "Bootstraps!" remember?

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They absolutely wouldn't. It'd kill consumer credit and tank the economy

 

[SageShinigami]

I don't think Biden or Dems would ever do that, but I could absolutely see the argument. If the program is costing that much over 24 years, it's only going to continue to snowball as more people go to college. The solution to this issue is probably something unimaginable-- like federal regulation of university pricing, federally funded universities that offer direct career paths, or pulling out completely and ending the Direct Loans program.

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What argument? Causing tons of people to default on debt they can't pay back would obliterate the economy.

 

[Deleted member 24052]

They absolutely wouldn't. It'd kill consumer credit and tank the economy

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If that's the case, would cancellation of the debt improve consumer credit and benefit the economy?

 

[dyelawn91]

Cap tuition pricing for public universities. It's the only long term solution to this I can think of.

 

[WedgeX]

In fact I wonder if them publishing this report is setting the ground for justification of cancellation

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Government can be smrt like that.

But only smrt.

 

[ZeroMaverick]

What argument? Causing tons of people to default on debt they can't pay back would obliterate the economy.

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The argument that IDR costs the government more than they're getting back from the payments they're collecting.

 

[kmfdmpig]

Cap tuition pricing for public universities. It's the only long term solution to this I can think of.

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That'd help but states have been cutting funding for state universities for years which leads to increased tuition and a greater focus on attracting international students who pay a higher tuition rate than in-state students do.

 

[Vic Damone Jr.]

Cancel the debt. Money is fake.

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Watch your mouth you socialist?

*proceeds to give billions to corporations and wealthy

 

[fragamemnon]

IDR only would meet those goals if the holders of the debt who have income-driven repayment get value out of their degree.

Worth looking into which degree programs and what level of education have the worst performing loans-this activity is elite overproduction and just foments unrest and resentment as people don't get what they hoped for in terms of class stability and success in life.

Those degree programs should then not be eligible for student loans unless the university is willing to reinsure them against losses or reduce the cost of the programs so their expected value to degree holders isn't so poor.

These kinds of reforms also would make cancelling all the bad debt an actual serious proposal worth considering, as the reforms should prevent the problem from happening again to the next generation of borrowers.

 

[ZeroMaverick]

IDR only would meet those goals if the holders of the debt who have income-driven repayment get value out of their degree.

Worth looking into which degree programs and what level of education have the worst performing loans-this activity is elite overproduction and just foments unrest and resentment as people don't get what they hoped for in terms of class stability and success in life.

Those degree programs should then not be eligible for student loans unless the university is willing to reinsure them against losses or reduce the cost of the programs so their expected value to degree holders isn't so poor.

These kinds of reforms also would make cancelling all the bad debt an actual serious proposal worth considering, as the reforms should prevent the problem from happening again to the next generation of borrowers.

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I don't see the reform happening, though

 

[captmcblack]

I don't understand this article...when did IDR start? I thought that was a thing that came about in the 2010s, but this is talking about a wider period of time than that.

 

[Autumn]

State university should be free. It would solve a lot of these problems.

 

[mbpm]

Who gets paid from this debt though

 

[Deleted member 83599]

It's past time for federal regulation of colleges, what they charge, they courses they teach, what we allow loans to be used on, and actually getting people help with finding jobs in those fields after they graduate.

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Yeah absolutely fucking not on the underlined.

 

[SageShinigami]

The argument that IDR costs the government more than they're getting back from the payments they're collecting.

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If you fuck the economy trying to get the government paid, whoever's in charge is getting voted out.

 

[Diarrhea Day-Lewis]

Yeah the IDR is bs. Once I got married my payment more than doubled because now I also "had" my wife's income, which is fine if she wasn't also paying her loans and also had hers doubled. Not looking forward to restarting the payments and I'm hoping for the 10k forgiveness asap since I'm only at 23k roughly

 

[Aselith]

It's past time for federal regulation of colleges, what they charge, they courses they teach, what we allow loans to be used on, and actually getting people help with finding jobs in those fields after they graduate.

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What the fuck

 

[Sordid Plebeian]

What a wonderful system we live in

 

[Piggus]

People saying to cap tuition need to keep in mind that state funding for public universities is relatively weak compared to what it used to be and it puts a lot of schools in a bind. I sat in on some meetings at a university going through a retrenchment process due to a small drop in enrollment, and they were trying to decide between cutting courses (ie jobs) or raising tuition. Ultimately they cut courses to avoid raising tuition, but it was clear there wasn't any good solution without more state funding.

 

[RomanticHeroX]

IDR only would meet those goals if the holders of the debt who have income-driven repayment get value out of their degree.

Worth looking into which degree programs and what level of education have the worst performing loans-this activity is elite overproduction and just foments unrest and resentment as people don't get what they hoped for in terms of class stability and success in life.

Those degree programs should then not be eligible for student loans unless the university is willing to reinsure them against losses or reduce the cost of the programs so their expected value to degree holders isn't so poor.

These kinds of reforms also would make cancelling all the bad debt an actual serious proposal worth considering, as the reforms should prevent the problem from happening again to the next generation of borrowers.

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That's appalling, frankly. College is not meant to be fancy job training and it never should be. Judging the worth of a degree program on its ROI means that college will be nothing but subsidized training for large corporations while the arts and humanities wither and die. The only solution is to subsidize free or incredibly low cost university education for the broader benefit of society, like virtually every other wealthy nation already does.