A shocking new report shows that the federal government will losing $200 billion in student loans.
Here’s what you need to know.
The US Department of Education has dramatically underestimated the cost of the federal student loan program and to lose $197 billion in student loans issued during the last 25 years. According to the Government Accountability Office, the Department of Education originally projected student loans from 1997 to 2021 would generate $114 billion. However, their projections were off by $311 billion.
Student loans: what happened?
There are several reasons why the federal government will now lose money on student loans, including:
Federal student loan repayments have been suspended since March 2020, when Congress passed the Cares Act, providing historic student loan relief. The Care Act included a moratorium on federal student loan repayments, a 0% interest rate on student loans, and a halt to collection of student loan repayments. President Donald Trump extended this student loan relief twice, while Biden extended the student loan payment break four times. More and more student borrowers are also choosing to enroll in income-driven repayment plans, which base a borrower’s monthly student loan payment on their discretionary income. Republican members of Congress, including Rep. Virginia Foxx (R-NC), the lead Republican on the House Education and Labor Committee, called for the report amid concerns about government spending. Foxx slammed Biden for canceling $400 billion in student loans and said he should end the student loan payment hiatus.
Biden to decide whether to extend student loan payment break in weeks
As the student loan payment break ends on August 31, Biden could extend this student loan relief for the fifth time. Education Secretary Miguel Cardona said Biden could extend the student loan payment break. However, Biden did not indicate whether student borrowers should expect the student loan moratorium to continue. Biden said he will decide whether to enact a large-scale student loan forgiveness before the student loan payment break expires. Borrowers are eagerly awaiting Biden’s announcements, with leaked documents disclosing the potential student loan forgiveness plan. If Biden extends student loan payment pause, borrowers could get more student loan relief beyond August. However, if student loan repayments begin again, make sure you are prepared. Here are some of the best ways to pay off student loans and save money: