Chairmen Enzi and Alexander Request Report on Cost of Student Loan Repayments
WASHINGTON D.C. – Senate Budget Committee Chairman Mike Enzi (R-WY) and Senate Health, Education, Labor, and Pensions Committee Chairman Lamar Alexander (R-TN) are asking the Congressional Budget Office (CBO) to examine the effects of federal student loan policies on borrowing, loan repayment, cancellation, discharge, and forgiveness.
The chairmen are seeking information on income-driven-repayment (IDR) plans. IDR plans allow student borrowers to pay a percentage of their discretionary income every month for a certain number of years, depending on the plan, and then have the remainder of their student loan balances forgiven. Of the $865.3 billion in outstanding principal and interest balances from direct loans and Department of Education-held federal family education loans, $396.5 billion is in IDR plans.
“We are troubled by the financial state of IDR plans,” the senators wrote. “According to the National Student Loan Data System, student loans in these plans account for 46 percent of all federal student loan dollars in repayment. But these repayment options may not be sustainable.”
The senators noted that on January 31, 2018, the Education Department’s Office of the Inspector General said decision-makers and others may not be aware of the growth in the participation in these IDR plans and the risk that the federal government may lend more money than is repaid from borrowers. They requested that CBO estimate the date when, absent legislative changes, this imbalance will eventually occur.
“We ask that CBO provide detailed information on the loans in IDR plans that are expected to be in negative amortization, repaid in full, forgiven at the end of 20 or 25 years, or forgiven at the end of 10 years due to the combination of an IDR plan and Public Service Loan Forgiveness. Any system that lends more than is repaid will surely become a liability to federal taxpayers,” wrote the senators.
View the letter to CBO here.
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