By Hugh T. Ferguson, NASFAA Staff Reporter
Ahead of Miguel Cardona’s first congressional hearing as Secretary of the Department of Education (ED), a pair of Republican House leaders are alleging the department is burying a report showing decades of federal miscalculations in student loans program profits.
In a letter spearheaded by Reps. Virginia Foxx (R-N.C.) and Mike Bost (R-Ill), ranking members of the House Education and Labor and Veterans Affairs committees, the members seek answers to a reported “hundreds of billions of dollars wide gap between what the executive branch says student loans are worth and the real value of those loans.”
The allegation stems from a recent article published in The Wall Street Journal that cites a report requested by former ED Secretary Betsey DeVos that found over the course of three decades, Congress, various administrations, and federal watchdogs had “systematically made the student loan program look profitable when in fact defaults were becoming more likely.”
Foxx and Bost call on Cardona to release the report cited in the article by May 5.
“The public policy implications of such a discrepancy are enormous. Federal student loans provide access to college for many Americans,” Foxx and Bost write. “Taxpayers deserve to know if their investment has a junk rating. Students’ ability to pursue a college degree is threatened if the federal government is no longer able to offer them loans.”
A number of OMB staffers were also cited in the article and expressed concern over the accuracy of analysis coming from private-sector officials who do not have experience with the federal budgeting process.
Cardona is scheduled to testify before the House Appropriations Subcommittee on Labor, Health and Human Services, Education, and Related Agencies on Wednesday, May 5.
Meanwhile, ED is expected to soon release a memo concerning what — if any — authority the executive branch has to cancel student loans.
Publication Date: 5/3/2021
Ben R | 5/4/2021 9:5:53 AM
Anyone who looks honestly at the repayment data (actual repayment of principal and interest) and all the forgiveness programs would agree with the WSJ findings that there is a problem that needs to be addressed. If we should just ignore these valuations and not account for the cost because all of it is a public investment with real returns, then those off the book returns need to be quantified to justify the cost for all of the existing and proposed forgiveness programs. Either borrowers are better off economically and are therefore able to repay their loans or they are not. Either the portfolio is significantly distressed, or it isn’t. Why forgive billions of dollars of loans through a variety of programs if everything is performing as it should?
David S | 5/3/2021 8:54:24 AM
The federal government offers student loans to those who need them as a service; the intention is to provide access for those who otherwise would not be able to afford to enroll in postsecondary education. Whether or not the government turns a profit, or how much profit, is 100% irrelevant. There is no such thing as a "junk rating" in government spending programs. If Congresswoman Foxx and Congressman Bost are concerned that student loans don't turn a profit, wait until they look at defense spending.
And besides, if the government is lending at a not particularly low interest rate, deducting origination fees, and then the borrowers have better earning potential and therefore pay more taxes over the course of their lives, and are less reliant on unemployment and all other forms of public assistance, and more likely to send their kids to college to repeat that growth cycle...yeah, the government sure is making a profit off student loans. A big one, maybe too big. Stop the performative nonsense and get back to helping students.
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