The price tag on a popular student loan repayment program is far larger than Education Department estimates, the Government Accountability Office said Wednesday. The GAO pegged the true cost at about $108 billion and called the Education Department’s accounting unreliable.
To help people manage their student loans, the Obama administration has expanded programs that cap monthly payments to a percentage of earnings and eventually forgives the balance. Enrollment in these income-driven repayment plans is soaring and so is the cost, but the government’s budget estimates are not keeping pace, an oversight that fuels criticism of a federal policy that conservatives say has become far too expensive.
Current budget estimates for income-driven plans are more than double what was originally expected for loans made in fiscal 2009 through 2016, climbing from $25 billion to $53 billion, according to the GAO report. The growth is primarily a result of the rising volume of loans in the plans, but researchers at the GAO say faulty projections from education officials may cause costs to be over- or understated by billions of dollars.
“Some uncertainty is unavoidable when anticipating long-term loan costs,” the GAO wrote, “but we found numerous shortcomings in Education’s estimation approach and quality control practices that call into question the reliability of its budget estimates and affect the quality of information Congress has to make informed budget decisions.”
The report takes issue with education officials’ assumption that borrowers’ incomes will not grow with inflation, which could lower estimated costs by more than $17 billion. The model also fails to account for people switching in or out of the plans in the future, which frequently happens when they have to certify their income to remain in the program each year.
In a letter to the GAO, Amy McIntosh, a deputy assistant secretary in the Education Department, said the agency has been working with Treasury to revise its estimates and agreed that there is room for improvement. The department in its annual budget report said the money being repaid through other student loan programs offsets some of the expense of the income-driven plans.read more