A study from the Government Accountability Office reveals the costs of student loan debt forgiveness as well as the student loan payment moratorium in place since 2020—which may be extended again.
08/03/2022 2:30 P.M.
3 minute read
New research from the Government Accountability Office (GAO) explores the profits the U.S. Department of Education gained from the federal student loan program and costs to taxpayers, especially since student loan relief was offered in the form of a pause on repayments since 2020, Yahoo Finance Senior Columnist Rick Newman reports.
“The GAO data puts new emphasis on the cost of debt forgiveness, in terms of federal priorities. The CARES Act, which Congress passed as the first tranche of COVID relief in March 2020, suspended most federal student loan payments and interest accrual for five months,” Newman reports. “Trump and Biden have extended that deadline five times, with payments now set to resume Sept. 1. But Biden seems very likely to extend the deadline again—possibly through the end of the year—so that borrowers who happen to vote can enjoy the moratorium through the midterm elections.”
Newman reports profits from the federal student loan program have been “elusive” and lead to higher costs for taxpayers than the Department of Education predicted.
The GAO study “finds that the Education Department has forecast a net profit on its student loan program for 19 of the last 25 years, yet only turned a profit in one of those years,” according to Newman’s reports. “Since 1997, the Education Department expected student loans to generate $114 billion in federal income, when in reality those loans are likely to cost the government $197 billion. That’s a difference of $311 billion.”
Biden’s 2020 campaign included support for student loan forgiveness, such as a fixed amount of cancelled debt per borrower and a proposed program to stop debt for undergraduates with federal student loans and “incomes under $125,000 per year who attended public institutions or historically Black colleges and universities (HBCUs) and private minority-serving institutions (MSIs),” ACA International previously reported.
The Biden administration has, in the meantime, adopted targeted tactics for student loan forgiveness through changes to requirements for federal student loan programs, such as the Borrower to Defense Repayment Program and Public Service Loan Forgiveness Program.
The White House has extended student loan payment and interest relief until Sept. 1, ACA previously reported.
Questions remain about how much these actions would help borrowers and the economy, and what some of the other unintended consequences might be, ACA previously reported. A report from the Brookings Institution argues that only targeted debt relief policies can “reduce injustices in student loans” and broad student loan debt relief is regressive.
On Capitol Hill, ACA submitted a letter to the Senate Committee on Banking, Housing and Urban Affairs before a May hearing, outlining concerns with blanket student loan forgiveness policies and the impact on borrowers and the credit-based economy.
Newman also reports that based on the GAO research, the student loan payment moratorium “has already cost the government more than $100 billion in foregone revenue from interest payments. Hardly any of the 40 million federal student loan borrowers, who owe the government $1.4 trillion, have been making payments since 2020.”
Meanwhile, members of Congress are calling on Biden to enact student loan forgiveness, but he wants Congress to pass legislation—which Democrats in the majority may not have the votes to carry, according to Newman.
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