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What They’re Saying: The Education Department’s $311 Billion Budget Blunder

A new report by the nonpartisan Government Accountability Office revealed that the Department of Education’s estimates on the cost of the federal student loan program were off by hundreds of billions of dollars. The report concludes that the massive budget mistake was due to irresponsible changes to student loan programs and incorrect assumptions about borrowers’ repayment choices and economic circumstances.

Here’s what they’re saying about this blockbuster GAO report:

“The Government Accountability Office said in a report Friday that because of policy changes and updated estimates on how much borrowers will actually repay, the Direct Loan program, which had $1.4 trillion in debt outstanding at the end of the last fiscal year, will fall far short of its original plan to make money for the federal government. Instead, they said, it will run deep in the red.”—Melissa Korn, Wall Street Journal

“A new Government Accountability Office report, requested by Foxx, shows the federal government is on track to lose $197 billion in revenue from the lending program, and that’s before accounting for Biden’s proposed changes.”—Danielle Douglas-Gabriel, Washington Post

“The GAO conducted the analysis at the request of several Republican lawmakers including Sens. Richard Burr of North Carolina and Mike Braun of Indiana as well as Reps. Virginia Foxx of North Carolina and Greg Murphy of North Carolina. They said the report is evidence that ‘taxpayers have lost hundreds of billions of dollars on this program.’”—Megan Henney, Fox Business

“The Department of Education’s massive undercounting of the cost of the federal student loan program is yet one more reason Washington should not be in the business of providing loans for college. It used to be the domain of the private sector, and to the private sector it should return. GAO’s new blockbuster report is a case study in why this bad accounting – and access to easy money through federal student loans – cannot continue.”—Lindsey Burke, Daily Signal

“… ED made several erroneous assumptions that led to an overly rosy financial picture of the loan program. … The era of free money is over: instead of piling more and more subsidies onto student loans, we need to have an frank conversation about the best way to allocate scarce federal resources in order to help borrowers most in need. That conversation must start with an honest accounting of the loan program’s existing costs. … The silver lining of the GAO report is that it may prompt Congress to focus on fixing the student loan fiasco.”—Preston Cooper, Forbes

“Until 2009, the student loan program consistently operated at an annual loss between $2 billion and $5 billion, before nearly doubling its deficit to $9 billion in 2010.”—Jeremiah Poff, Washington Examiner

“Although the DOE originally estimated federal direct loans made in the last 25 years would generate billions in income for the government, its current estimates show these loans will cost the government billions…”—Charlie McCarthy, Newsmax

“The new GAO report details the department’s miscalculation with the financial aid system. Some of the increased costs of the direct loan program came from pandemic-related relief. But the department also misjudged how loans would perform, the GAO said.”—Jeremy Bauer-Wolf, Higher Ed Dive

“…[A] new report shows that federal student loans have actually cost the government $197 billion… The findings come from a Government Accountability Office report released today that undermines a narrative from the department that the federal student loan program is generating income.”—Meghan Brink, Inside Higher Ed

“But Republicans are poised to tar any relief as both fueling inflation and wasting taxpayers’ money. On Friday, they pointed to a report by the Government Accountability Office that found the last 25 years’ worth of federal student loans will already cost taxpayers about $197 billion, rather than generating $114 billion in revenue as the Education Department previously estimated.”—Nancy Cook, Jarrell Dillard, and Janet Lorin, Bloomberg

“About $189 billion, the majority of the increase, is due to reestimates based on actual data on how loans have performed, including updated income data for borrowers in Income-Driven Repayment plans.”—Bianca Quilantan, Politico

“Republicans on the House education committee asked an independent government watchdog to calculate how much federal student loans are costing the country. It found the loans might not be as profitable as the Education Department thought.”—Ayelet Sheffey, Business Insider

“The GAO analysis found that loans made between 1997 and 2021 are expected to cost the government almost $9 for every $100 disbursed. That’s a big difference from the government’s expectation that the loans would generate $6 for each $100 lent.”—Annie Nova, CNBC

“The cost discrepancies vary because the federal direct loan program has drastically changed in the last decade and the COVID-19 pandemic completely froze nearly all federal student loan payments for over two years.”—Shirin Ali, The Hill

"Republicans are pushing Biden to start payments and have argued against debt cancellation. They raise the cost as a concern, and they most recently mentioned a Government Accountability Office report that found the Education Department is projected to lose about $200 billion on student loans the government directly made from fiscal years 1997 to 2021. The department had previously forecasted making about $115 billion on the loans, and the office said the student loan moratorium and changes to how borrowers repay their loans through income-driven plans have driven up the cost." —Chris Quintana, USA Today

“The loss of more than $310 billion in projected earnings can be attributed to both a dramatic overestimate of the program’s revenue at the outset, and changes to legislation governing the payment of student loans, according to the GAO. .. The program’s deficit was approximately $21 billion in 2017 and 2018, before dropping to $16.1 billion in 2019, returning to $21.1 billion in 2020, according to the report. This indicates that record high deficits in the ballpark of $21 billion began almost two years before the pandemic.” —John Hugh Demastri, Daily Caller 

“A bigger reason for the $311 billion difference, the report says, is that initial predictions did not account for the high percentage of borrowers who ended up enrolling in income-driven repayment (IDR) plans. About half of all direct loans are now paid through these plans, which are designed to help people who can't afford to make large monthly payments and which promise loan cancellation after 20-25 years. The GAO explains, ‘the monthly payment amount for borrowers in Income-Driven Repayment plans can change based on their economic situation.’ It's one of many reasons government costs around the program have been unpredictable.” —Sequoia Carrillo, NPR

“The U.S. Department of Education substantially underestimated the cost of the federal student loan program and will likely lose $197 billion on student loans issued over the past 25 years.”—Zack Friedman, Forbes

Read more about the report here.
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