Another Obama federal program designed to help struggling college graduates has failed the taxpayers miserably.
Taxpayers will now pay more than twice what was expected for a reduced student loan repayment program.
At $74 billion, it was nearly twice what was anticipated.
Why, you may ask? Because, apparently, the Obama administration is really bad at math.
According to the Washington Times:
“The Government Accountability Office said the cost to the government for covering loans made between 2009 and 2016 was more than double the amount estimated by the Department of Education. The cost could still rise if more borrowers enroll.
The investigators found that the administration didn’t account for inflation in borrowers’ income for its initial estimates of the program costs.
More than 5 million borrowers are enrolled in the income-based repayment loan program, about 25 percent of all students who receive direct loans from the federal government.”
This lack of foresight – for such a simple Economics 101 basic term like inflation – is gross incompetence. Or was it possibly intentional?
Senate budget Chairman Michael Enzi blasted the administration for misleading taxpayers and avoiding congressional oversight with the loan program, especially when our national debt is in utter crisis.
Enzi said of the lack of the administration’s gross manipulation:
“This administration has been manipulating the terms of the student loan program without the consent of Congress, while shirking its statutory duty to carefully assess the cost impact of those changes.
It will be crucial to consider updates to the Federal Credit Reform Act because Congress is not receiving credible, transparent cost data under the existing statute, as this report suggests.”
The student loan program was designed to adjust for the percentage of the student’s income following graduation. And after 25 years, if there is a remainder on the loan, then it is forgiven.
The Government Accountability Office reported that only $215 billion will be repaid by the borrowers of the $352 billion in loans made between 1995 –2017 (this number includes eligible borrowers).
The difference is $108 billion, which will be forgiven, and $29 billion will be discharged because of death or disability of the borrower.
White House Press Secretary Josh Earnest said President Obama
“has placed a priority on making sure that graduating students are treated fairly by the Department of Education and by lenders when it comes to their student loans.”
Last time I checked, Obama has a short window to implement his “priority” or it might be just another thing that President-elect Donald Trump will solve, just like saving jobs from Ford, Carrier, and Nabisco before he’s even taken the oath.
According to the Washington Times:
“The [GAO] report criticized the Education Department for not providing ‘sufficient information’ about how it reached its own cost projections for its income-based repayment program.
The program is the largest federal direct loan program, with $912 billion in outstanding loans as of last June.
Education officials told GAO that the higher-than-expected loan volume is likely due to more generous terms made available since 2012, increased promotion of the loan program and increased college attendance after the recession of 2008-09, coinciding with the end of a guaranteed loan program through private lenders.
The GAO blamed administration policies such as making more generous benefits retroactively in the “Pay As You Earn” repayment plan.”
College students failing or defaulting on loans despite achieving their degrees should be a wake-up call to students and parents that there is no shame in not going to college and that trade schools are just as valuable, if not more so, than a Bachelor’s.
Many young Americans are blinded by this notion that a college degree is the pathway to success, but defaults on these repayments are mainly because liberal arts degrees are a dime a dozen now and the market is so competitive. This is a clear indicator that alternate avenues are proving to be more financially advantageous.