Dec 07, 2016 12:23 PM EST
U.S. Student Loan Repayment Will Cost Taxpayers $108 Billion [Video]
The Government Accountability Office reported that the Education Department has miscalculated the budget on a popular student loan repayment program. GAO has estimated the real cost as $108 billion and stated that the accounting of the Education Department unreliable.
Washington Post reports that the Obama administration has widened the scope of the programs that allow capping of monthly payments to a percentage of earnings. These steps eventually forgive the balance. There is a soaring cost in the enrollment in these income-driven repayment plans. However, the federal government's budget is incapable of keeping up with the expenses.
There was a doubling of loans compared to that which was originally expected from fiscal 2009 through 2016 which is greater than the current budget estimates. This increased from $25 billion to $53 billion. The increase in the growth is a consequence of the growth in loan volumes in the plans. On the contrary, GAO reports that these erroneous projections from education officials may have been the reason of over- or understated cost by billions of dollars.
GAO laments that uncertainty is unavailable when estimating long-term loan costs. However, they have discovered the errors in Education's estimation approach and practices in quality control. This clouds the credibility of the department regarding budget estimates. This also affects how Congress decide on budgetary issues.
Amy McIntosh, one of the deputy assistant secretaries in the Education Department, sent a letter to GAO stating that the agency has been working with Treasury to change its estimates and agreed that there is a possibility of improvement. The Education Department handles the issue through its annual budget report that the money being repaid through other student loan programs offsets some of the income-driven plans.
Currently, approximately 5.3 million Americans are enrolled in an income-driven repayment plan with an estimated $353 billion in outstanding student loans.
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