Enzi Asks GAO For Cost Estimates on Dept. of Education's Income-Driven Repayment Plans
WASHINGTON D.C. – Senator Mike Enzi (R-WY), Chairman of the Senate Budget Committee, in a letter today to Gene Dodaro, Comptroller General of the U.S. Government Accountability Office (GAO), asked the agency to help determine the true cost of the Department of Education's income-driven repayment (IDR) plans, which now comprise 28 percent of the Direct Loan balance in repayment. The Chairman said he was concerned because "the ultimate cost of IDR remains uncertain."
Chairman Enzi’s full letter can be viewed here.
Since 2009, the Department of Education (Education) has implemented several income-driven repayment (IDR) plans designed to ease the burden of rising federal student debt, now over $1 trillion. Of Education’s eight current student loan repayment plan options, four are income-driven. Under these plans, monthly payments are calculated based on borrowers’ adjusted gross income, family size, and outstanding loan balance -- and there are options for eventual loan forgiveness. Each program has its own set of eligibility requirements, terms, and conditions, with newer plans offering more generous terms, including lower monthly payments and expanded loan forgiveness opportunities. Through administrative action, Education is currently establishing a fifth plan to make these more generous provisions available to additional cohorts of borrowers.
According to Education, participation in IDR plans is increasing, and debt in these plans now comprises 28 percent of the Direct Loan balance in repayment. IDR plans carry higher estimated long-term costs to the government (subsidy costs) than other repayment plans, including the Standard 10-year repayment plan, and estimates of these costs are growing. For instance, the President’s 2016 budget included a $22 billion upward reestimate in subsidy costs of outstanding Direct Loans, primarily due to growing participation in IDR plans.
The ultimate cost of IDR remains uncertain. The degree to which Education’s budget projections reflect actual costs depends on the agency’s ability to predict numerous variables, including program participation rates, the volume of loan balances ultimately forgiven, interest rates etc.
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