President Joe Biden’s administration raised forecasts on losses the federal government will take on student loans by $53 billion, due to lower repayment rates in the past year and coronavirus relief efforts.
Biden’s proposed budget for the fiscal year beginning in October estimates that the taxpayers will lose approximately $68 billion on all outstanding student debt now, up from $15 billion a year ago, according to an analysis of the budget by the Wall Street Journal.
The estimate is based on updated data on how much money the 43 million student loan borrowers in the United States have paid to the federal government recently in order to repay their loans.
The projections are significantly smaller than the losses forecast in an internal analysis done by former President Donald Trump’s Education Department, which showed taxpayers would take the hit for approximately $1 trillion of the $1.6 trillion student debt portfolio.
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The student loan losses could increase further if the Biden administration decides to forgive some of the student debt altogether, as Biden promised on the campaign trail and as some congressional Democrats have pushed him to do.
Biden said he would support wiping out $10,000 in student loan debt for every borrower, which would forgive $377 billion, according to the Brookings Institution, a liberal think tank.
He said he would prefer for Congress to accomplish this through legislation but has also asked his lawyers to look into the legality of using an executive action to achieve it.
The student loan losses have increased significantly over the past year due to the federal government’s attempts to help borrowers deal with the pandemic-induced economic downturn.
Trump administration executive actions and relief passed by Congress at the onset of the coronavirus pandemic last year put a pause on most student loan borrowers’ monthly payments until January of this year.
Biden then extended this leniency until the end of September, and the government has also stopped charging interest on the loans during this period.
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The Biden administration hasn’t indicated yet whether or not it will extend the student loan pause beyond September, which Republicans oppose.
