Student loans cost federal government billions, report finds: NPR

Students at Pasadena City College attend the 2019 graduation ceremony in Pasadena, California.

Robyn Beck/AFP via Getty Images


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Robyn Beck/AFP via Getty Images


Students at Pasadena City College attend the 2019 graduation ceremony in Pasadena, California.

Robyn Beck/AFP via Getty Images

A new report The U.S. Government Accountability Office found that the U.S. Department of Education miscalculated the cost of the federal student loan program.

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

A percentage of that shortfall, $102 billion, comes from the unprecedented federal student loan repayment freeze that began in 2020 under the CARES Act. The break has been extended several times under former President Trump and President Biden. The latest extension runs until August 31.

A larger reason for the $311 billion gap is that the original projections did not take into account the high percentage of borrowers enrolled in income-driven repayment (IDR) plans, the report said. Now, about half of all direct loans are paid off through these plans, which are designed to help people who can’t make large monthly payments and promise to eliminate the loan after 20 to 25 years. The GAO explains, “The monthly payment amount for borrowers in income-driven repayment plans can vary depending on their economic situation.” This is one of the many reasons why government spending around the program is unpredictable.

IDR also failed to deliver on its promise to borrowers: A recent NPR investigation revealed that the plans were mismanaged by loan servicers and the Department of Education. As a result, relatively few borrowers have actually had their loans discharged through IDR.

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