President Obama’s generous student loan program may have earned him some support among young Americans in an election year, but it came at a hefty price.
The president’s budget revealed this week that the changes to its student loan program had left it with a $21.8 billion shortfall last year, making it the largest shortfall ever recorded for a government credit program, Politico reported.
About 40 million Americans have taken out student loans and are currently burdened with more than $1.2 trillion in outstanding debt.
The goal of Obama’s changes was to provide relief for borrowers, but it turned out that his reforms may have done more harm than good.
His executive order allowed some borrowers to reduce their payments to 10 percent of their income and would even forgive some borrowers’ loans after 20 years. The Education Department proposed even further steps with a “pay-as-you-earn” program.
The Education Department confirmed to Politico that these program were the “primary drivers” of the significant shortfall. The $21.8 billion will be added to the deficit automatically — an increase of nearly 5 percent to the federal deficit overall.
The White House budget office did not have a record of any larger addition to the deficit from a credit program since the current rules went into effect in 1992, Politico reported.
And this could just be the beginning.
Barclays Capital has warned in several reports that Obama’s student loan allowances could cost taxpayers as much as $250 billion over the next decade. With $21.8 billion right out of the gate and more relief planned for next year, that hardly seems too far off.
But for their part, the administration doesn’t seem worried about it. Officials told Politico that after this year the shortfall will be will be “baked into the cake.”
