A new report from the federal government’s watchdog agency shows the Department of Education understated the cost of the federal student loan program by $311 billion.
The Government Accountability Office‘s report, released Friday, showed that from 1997 to 2021, the department estimated the federal direct loan program would generate $114 billion in revenue from the program over that period of time.
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But the program, which disbursed $1.8 trillion in student loans, has actually cost the department $197 billion over the past 25 years, a discrepancy of $311 billion.
The report says $189 billion of the $311 billion shortfall was due to the department making assumptions about student loan borrowers that ultimately proved to be flawed or incorrect. The additional $122 billion was due to “programmatic changes” that included the suspension of loan payments and interest accumulation during the COVID-19 pandemic.
Until 2009, the student loan program consistently operated at an annual loss between $2 billion and $5 billion, before nearly doubling its deficit to $9 billion in 2010.
The only time that department achieved net income from the direct student loan program was during the 2012 fiscal year, when the department generated $600 million in revenue from the loan program. The outlier year was bookended by $10.5 billion in losses in 2011 and 2013.
In 2014, the department lost $15.6 billion and peaked at $21.1 billion in 2020, which was only marginally higher than the $21 billion deficit in 2017.
Data for the 2021 fiscal year is incomplete.
Reps. Virginia Foxx (R-NC) and Greg Murphy (R-NC), along with Sens. Richard Burr (R-NC) and Mike Braun (R-IN), the top Republicans on the House and Senate education committees, were quick to highlight the report’s findings, saying that “taxpayers have lost hundreds of billions of dollars on this program.”
“For decades, the Department of Education has significantly underestimated the true cost of the Direct Loan program. Today’s GAO report shows that the Department’s budget was off by more than $300 billion — all of which will be paid for by hardworking American taxpayers,” they said.
The Republicans on the committee criticized the Biden administration’s approach to student loan policy, noting that the GAO’s report does not include recent actions by the Department of Education that expanded eligibility for certain loan forgiveness programs.
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“President Biden is on track to make the most radical changes to postsecondary education at the expense of all taxpayers,” the Republicans said in a statement. “The GAO report is only the latest evidence that, at best, Biden’s Department of Education doesn’t have a clue about the real harm of its policies; at worst, the political appointees there simply don’t care and are unwilling to disclose the true costs to the American public.”
The Washington Examiner has reached out to the Department of Education for comment.
