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On July 29, the United States Government Accountability Office (GAO) published a report, Student Loans: Education Has Increased Federal Cost Estimates of Direct Loans by Billions due to Programmatic and Other Changes, in which the agency examined the changes to estimated costs and revenues generated by the Federal Direct Loan Program.

The Direct Loan program includes subsidized and unsubsidized Stafford Loans, PLUS Loans, and Consolidation Loans, along with a variety of repayment plans, such as standard, graduated, extended, and several income-driven repayment (IDR) plans.

The Department of Education (ED) had originally estimated that Direct Loans made in the last 25 years would generate $114 billion in income for the government, and while actual costs will not be known until the end of the loans’ terms, as of FY21, these loans are now estimated to cost the federal government $197 billion.

Cost increases since ED’s original estimates were driven by programmatic changes, including the suspension of loan payments and interest due to the pandemic, and reestimates based on revised assumptions about borrowers in IDR plans. The programmatic changes, which occurred in seven of the last 25 fiscal years, contributed $122 billion of the estimated $311 billion in total cost increases. The vast majority of those increases ($102 billion) were the result of relief provided to borrowers during the pandemic, including the suspension of payments, interest accrual, and involuntary collections for loans in default.

The cost reestimates, which ED is required to calculate annually as part of the federal budget process, are based on updates to the assumptions underlying ED’s student loan model that account for loan performance, changes in expected future performance, and economic changes. Those increased the Direct Loan Program costs by about $189 billion.

The GAO report acknowledges that estimating the cost of the Direct Loan Program is difficult due to the lack of historical data when new changes to the program are introduced and assumptions ED must make about borrower behavior over the life of a loan.

ED was given an opportunity to provide comments on a draft version of the report and said it has made improvements to its income modeling for IDR plans based in part on income data that borrowers in the plans provide.

In a statement published soon after the GAO report was released, Bobby Scott (D-VA), chair of the House Education and Labor Committee said, in part, “Every American deserves access to an affordable, high-quality college degree. Rather than cast blame on previous Administrations—two of which were Republican and two of which were Democratic—we should focus on solutions. The solution to this problem is not to eliminate the student loan program, but—rather—we should work together to address the rising cost of college, restore the value of the Pell Grant, and make meaningful reforms to the student loan program.”


Bryan Dickson

Director, Student Financial Services and Educational Programs


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