Estimated losses on the federal government’s student loan portfolio have been raised by $53 billion, per an analysis by the Biden administration, taking last year's projected deficit from $15 billion to $68 billion in long-term losses.
The new estimate, first reported by the Wall Street Journal, follows an initial report that contained an analysis detailing more than $500 billion in losses to the portfolio, prompting inquiries from Republican members of congress. The Department of Education (ED) ultimately dismissed that report, which was requested during former Education Secretary Betsy DeVos’ tenure, saying the analysis did not meet departmental standards.
This latest update provided by the Biden administration’s annual budget request takes into consideration federal relief offered as a part of pandemic aid. Those adjustments include the current federal suspension on student loan repayments, where ED calculated that the suspension has cost the government $38.6 billion from March through December of 2020 and will continue to increase so long as the benefit remains in place.
Prior to this new projection of long-term losses, top Republican officials had begun to pressure the administration to end the payment suspension.
Sen. Richard Burr (R-N.C.), ranking member of the Senate Health, Education, Labor, and Pensions (HELP) committee, and Rep. Virginia Foxx (R-N.C.), ranking member of the House Education and Labor committee, have argued that an additional extension of the pause on payments and interest accrual would be “unnecessary,” and pressed Education Secretary Miguel Cardona in a recent letter to detail how the agency plans to smoothly transition millions of student loan borrowers back into repayment.
Continued budgetary reports will likely heighten the ongoing conversations surrounding potential relief efforts for student loan borrowers, especially with the anticipation of repayments to resume after September 30, coupled with an anticipated memo from ED analyzing what, if any, authority the president has to administer student loan debt forgiveness.
The nonpartisan Committee for a Responsible Federal Budget (CRFB) in a recent study provided additional insight into what impact broad student loan cancellation could have for borrowers and concluded that administering $10,000 or $50,000 for each borrower with federal student loans would produce “only 2 to 27 cents of economic activity for every dollar of cost,” respectively.
Last week NASFAA, with support from Arnold Ventures, kicked off an 18-month-long project to develop thoughtful, targeted policy solutions to treat the causes of student loan repayment issues and will develop policy recommendations to treat the underlying flaws in our current student loan repayment system, while underscoring the benefits of a strong self-help federal loan program.
Stay tuned to Today’s News for more details on the federal student loan system.
Publication Date: 6/8/2021