GAO: So About That $114B Due In From Student Loans...

Watchdog report: Education Dept. is instead set to lose about $197B, partly due to COVID relief
By Jenn Gidman,  Newser Staff
Posted Aug 2, 2022 9:40 AM CDT
GAO: So About That $114B Due In From Student Loans...
Stock photo.   (Getty Images/zimmytws)

(Newser) – The Department of Education had been banking on getting its hands on $114 billion or so in income due from federal student loans issued over the past quarter-century. Instead, a watchdog has delivered some bad news: It's actually set to lose $197 billion, in part due to the suspension of loan payments made during the pandemic, reports CNBC. The report of this nearly $200 billion loss comes from the Government Accountability Office, whose analysis released Friday found that such loans made between 1997 and 2021 will cost the government about $9 for every $100 doled out. That contrasts with the initial projection that the Education Department would bring in $6 for every $100 lent.

CNBC and Forbes note that several reasons underlie the huge discrepancy, including the introduction of income-based repayment plans that shifted how much was coming in. But a significant factor is tied to COVID relief, which has involved a moratorium on student loan payments since March 2020, as well as a pause in interest accruing during that same time period. Both former President Trump and President Biden extended this relief program multiple times to help 40 million-plus borrowers weather the pandemic. The most recent extension ends Aug. 31, and Biden must decide whether to stretch it out once again—a move that some GOP opponents are against, including North Carolina Rep. Virginia Foxx, the top Republican on the House Education Committee who asked for the GAO audit.

The report "is only the latest evidence that, at best, Biden's Department of Education doesn't have a clue about the real harm of its policies," Foxx tells the Washington Post, which lays out the complexities of GAO auditors predicting who will prepay their loans and who will default. This may also not be the final tab: CNBC notes that if the Biden administration follows through on a much-talked-about proposal to forgive up to $10,000 for each outstanding student loan, the government could be out another $321 billion or so. The committee's chair, Democrat Robert Scott of Virginia, pushes back on Foxx's take, however, noting that both Democrat and GOP administrations have had a hand in setting up the current system. "The solution to this problem is not to eliminate the student loan program," he says. "Rather, we should work together to address the rising cost of college." (Read more student loans stories.)

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