GAO: Student Loan Cost Projections Doubled; Flawed Estimates Lack Transparency
WASHINGTON D.C. – The Government Accountability Office (GAO) today released the results of an extensive investigation requested by Senator Mike Enzi (R-WY), Chairman of the Senate Budget Committee, on the cost projections of the Income Driven Repayment (IDR) plans administered by the Department of Education. GAO’s report shows that the current cost projections for IDR plans are tens of billions higher than original estimates. GAO also found that the Department of Education used flawed data to estimate program costs, which is expected to result in massive loan forgiveness of more than $108 billion.
“At a time when our nation is facing a mammoth national debt, the Department of Education has expanded a student loan program that will cost twice as much as originally estimated,” said Chairman Enzi. “This extensive investigation by an independent government watchdog found that the Department of Education relied on flawed data and methods to estimate program costs. This Administration has been manipulating the terms of the student loan program without the consent of Congress, while shirking its statutory duty to carefully assess the cost impact of those changes. It will be crucial to consider updates to the Federal Credit Reform Act because Congress is not receiving credible, transparent cost data under the existing statute, as this report suggests.”
- Current cost projections of the IDR portfolio are tens of billions higher than original estimates. This is because IDR enrollment has far outpaced the Dept. of Education’s original assumptions. The cost estimate for IDR for loans issued from 2009 to 2016 is now $28 billion higher than original estimates.
- IDR is expected to result in massive loan forgiveness. GAO used the Dept. of Education’s projected loan cash flow data to determine that $108 billion of the $352 billion in student loan to be repaid via IDR is expected to be forgiven, pursuant to statutory and regulatory provisions allowing principal forgiveness after specified periods of IDR enrollment.
- Education’s IDR Cost-Estimation Methods and Data are Badly Flawed. GAO found that the Dept. of Education’s data lacked transparency, omitted key information about the cost of the loans, and made other flawed assumptions, which prevented Congress from knowing the cost of the IDR loan program.
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