Student loan borrowers have something to cheer about in the coming years: refunds. That’s according to The Wall Street Journal, which reported the U.S. federal government is on track to provide $108 billion or more in debt forgiveness for student loans during the next few years.
Citing a report to be released by the Government Accountability Office (GAO), WSJ said that the report will highlight that President Obama’s plan to help struggling student loan borrowers is more expensive than previously thought and that the Education Department’s accounting methods are falling short, understating the costs of its debt relief programs by tens of billions of dollars.
The report, which was ordered last year by Senate Budget Committee Chairman Mike Enzi (R-WY), was driven by an increase in enrollment in income-driven repayment plans that reduce the amount borrowers have to pay back each month based on their income. After 10–20 years, the remaining debt is forgiven. WSJ noted enrollment in the plans have more than tripled in the last three years, now accounting for 24 percent of all past students who borrowed from the federal government. All told, they owe $355 billion.
The GAO estimates that, of that amount, $137 billion will never be paid back, with $108 billion being forgiven by the government when the borrowers meet their end of the deal. The paper noted the $108 billion only covers loans made through the current school year. The other $29 billion will be discharged because of disability or death, according to the GAO report.
The GAO report also took issue with how the Education Department comes up with the budget estimates for the loan program, saying it failed to account for inflation when figuring out the future earnings of borrowers, nor did it take into account the potential for increases in the number of borrowers enrolling in an income-driven repayment plan.
“Due to growing IDR-plan popularity, improving [the Education Department’s] estimation approach is especially important,” the report says, according to WSJ. “Until that happens, IDR-plan budget estimates will remain in question, and Congress’ ability to make informed decisions may be affected.”