GAO Report: Student Loan Forgiveness Will Cost More than $100 Billion
STEVE INSKEEP, HOST:
Now when students borrow money from the federal government to go to school, they sometimes qualify for debt forgiveness after 10 or 20 or 25 years of payments. A report out yesterday from the Government Accountability Office shows that the amount the U.S. could forgive is more than $100 billion, much higher than earlier estimates. Kirk Carapezza from member station WGBH in Boston has more.
KIRK CARAPEZZA, BYLINE: The report finds that the government's plans to help student loan borrowers lower their monthly payments based on their income, and over time have those loans forgiven, could cost a whole lot more than the Education Department originally projected. When President Obama expanded the income-driven repayment programs, the goal was to avoid student loan defaults.
(SOUNDBITE OF ARCHIVED RECORDING)
PRESIDENT BARACK OBAMA: We're offering millions the opportunity to cap their monthly student loan payments to 10 percent of their income.
CARAPEZZA: Part of those programs offer forgiveness to any debt remaining after 10 to 25 years. The cost to taxpayers? Well, at the time the Education Department estimated it would total about $74 billion. But the Government Accountability Office now says it could cost more than $100 billion.
BARBARA BOVBJERG: They may have significantly under or over estimated. It's really not clear.
CARAPEZZA: Barbara Bovbjerg is with the Government Accountability Office. And she says the Education Department didn't take into account inflation and the growing number of student borrowers.
BOVBJERG: There's not enough transparency. But also it's not as reliable as we would like.
CARAPEZZA: The Education Department says it's committed to being more transparent and agrees with the report's findings. Jessica Thompson is a research director with the Institute for College Access and Success, which helped the government develop income-driven repayment plans.
JESSICA THOMPSON: We think it is an absolutely essential safety net for students, particularly as college costs continue to rise. Grant aid has not been able to keep pace. Incomes have gone down or stagnated.
CARAPEZZA: Thompson points out that students participating in these programs see lower default rates. And she's not surprised that the Education Department may have underestimated the total cost.
THOMPSON: Because you have to make big assumptions about people's incomes over time.
CARAPEZZA: Thompson is also quick to point out that every year the government does turn a profit on student loans. That might not satisfy policymakers though, who think income-driven programs are bad policy, costing taxpayers billions.
BARMAK NASSIRIAN: We kind of slapped something together as best we could. And surprise, surprise it's showing up as somewhat sloppy.
CARAPEZZA: Barmak Nassirian is with the American Association of Colleges and Universities. And he says making monthly payments more affordable doesn't necessarily make college more affordable.
NASSIRIAN: As long as we don't have a handle on college costs, attempting to deal the debt bubble is not going to be adequate.
CARAPEZZA: And without a way to contain skyrocketing tuition and fees, the government will continue to absorb additional costs.
For NPR News, I'm Kirk Carapezza in Boston.
NPR transcripts are created on a rush deadline by Verb8tm, Inc., an NPR contractor, and produced using a proprietary transcription process developed with NPR. This text may not be in its final form and may be updated or revised in the future. Accuracy and availability may vary. The authoritative record of NPR’s programming is the audio record.