The problem was reportedly due to flawed assumptions.
A Government Accountability Office report shows the Department of Education underestimated the cost of the federal student loan program by $311 billion. The federal government’s watchdog agency’s report released Friday showed that from 1997 to 2021, the department estimated the federal direct loan program would generate $114 billion in revenue from the program over that period. But the program, which disbursed $1.8 trillion in student loans, has actually cost the department $197 billion over the past 25 years, a discrepancy of $311 billion.
The report says $189 billion of the $311 billion shortfall was due to the department making assumptions about student loan borrowers that ultimately proved to be flawed or incorrect. The additional $122 billion was due to “programmatic changes” that included the suspension of loan payments and interest accumulation during the COVID-19 pandemic.
“Taxpayers have lost hundreds of billions of dollars on this program,” said members of the House and Senate education committees. “For decades, the Department of Education has significantly underestimated the true cost of the Direct Loan program. Today’s GAO report shows that the Department’s budget was off by more than $300 billion — all of which will be paid for by hardworking American taxpayers.” They concluded that the president’s policies regarding postsecondary education will continue to raise the cost burden on taxpayers.
At the same time, the Education Department has plans to carry out broad student loan forgiveness. The president has considered moving to cancel $10,000 in student debt for borrowers making under $150,000 a year.
As the Lord Leads, Pray with Us…
- For members of the congressional committees as they assess and inform the public regarding federal program costs and effectiveness.
- For Education Secretary Cardona as he implements and oversees the administration’s programs and policies.
- For wisdom for Director Cordray as he manages the Office of Federal Student Aid.
Sources: Washington Examiner, Bloomberg, Business Insider
