WASHINGTON–The U.S. Department of Education is expected to lose close to $200 billion from federal student loans made over the last 25 years, due in part to pandemic-era relief pausing the bills for borrowers, according to a new report.
In its analysis, the Government Accountability Office (GAO) said the Education Department had estimated these loans would generate around $114 billion in income. Instead, those loans will cost the federal government $197 billion.
A large share of the additional costs stem from the Covid pandemic-era pause on most federal student loan payments first enacted under the Trump administration and then continued by President Joe Biden,” reported MSNBC in its analysis. “As a result, most federal student loan borrowers haven't made a payment on their debt in more than two years, and interest hasn't accrued on their balances in the meantime.”
Higher education expert Mark Kantrowitz told MSNBC the GAO's findings were far from surprising.
"There have been several changes to the federal student loan programs, including the payment pause and interest waiver, that have increased the cost of the program, swinging it from a profit to a loss," Kantrowitz said.
Also Increasing Costs
The other changes to the federal student loan system that are likely to increase costs include the suspension of collection activity, another pandemic-related relief measure, and revised estimates to how much borrowers will pay down their debts, the report added.
According to GAO, the loans made between 1997 and 2021 are expected to cost the government almost $9 for every $100 disbursed.
“That's a big difference from the government's expectation that the loans would generate $6 for each $100 lent,” stated MSNBC.
The report added that the student loan woes predate the pandemic and were a problem even as the economy was enjoying one of its healthiest periods.
“More than 40 million Americans were in debt for their education, owing a cumulative $1.7 trillion, a balance that far exceeds outstanding credit card or auto debt,” MSNBC reported. “Average loan balances at graduation have nearly tripled since 1980, from around $12,000 to more than $30,000 today.”
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