By Adam Andrzejewski for RealClearWire
Bad assumptions on the part of the Department of Education led to federal student loans costing the government $197 billion since 1997 — instead of making $114 billion.
That’s according to a new report from the U.S. Government Accountability Office, which found that the $311 billion difference was due to “faulty assumptions.”
RELATED: Conservative Group Fights Back: ‘Stop Biden’s Bailout For Rich Kids’
Federal student loans were “originally estimated to generate $6 in income per every $100 disbursed” but they’re actually “expected to cost the government almost $9 for every $100 disbursed.”
That’s quite a miscalculation.
The GAO found by looking through the Department of Education’s budgets over the years that about 61 percent of the bad accounting was due to these faulty assumptions, like incorrect estimates on the economic standing of borrowers, underestimating the likelihood of borrower default, and underestimating the percentage of borrowers who would enter income-driven repayment plans.
The Direct Student loan program, which is the largest federal student loan program, accounts for about $1.4 trillion of the $1.7 trillion in outstanding student loans, The Daily Signal reported.
Support Conservative Voices!
Sign up to receive the latest political news, insight, and commentary delivered directly to your inbox.
About half of all loans issued in that program are being repaid through IDR plans, which cap monthly loan payments based on income.
The Congressional Budget Office reported in February 2020, “borrowers who enroll in IDR plans tend to borrow more and earn less than borrowers in fixed-payment plans.”
That means the student loan program is not only making less money than estimated, but also losing money.
RELATED: Joe Biden’s Loan Forgiveness Is Despicable. Conservatives Don’t Have A Clue Why.
The GAO found the other 39 percent of the miscalculation is due to “programmatic changes such as ongoing repayment pauses, participation in Public Service Loan Forgiveness, interest waivers, and new income-driven repayment…
Notice: Trying to access array offset on value of type null in /home/blackeco/public_html/wp-content/themes/goodnews5/framework/functions/posts_share.php on line 66
Notice: Trying to access array offset on value of type null in /home/blackeco/public_html/wp-content/themes/goodnews5/framework/functions/posts_share.php on line 82