The U.S. Government Will Forgive Far More Student Loan Debt Than Expected

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As serious as Last Week Tonight‘s deep dive into for-profit colleges and the staggering amount of student loan debt that college-aged Americans currently face, John Oliver is a comedian. So despite the anxiety-producing material he was discussing, the former Daily Show correspondent’s shtick was rife with humor. On the other hand, a new article in the Wall Street Journal concerning the subject is not so funny — especially when one considers the Government Accountability Office’s new report on the Obama administration’s debt forgiveness programs.

According to the WSJ, the GOA report suggests the federal government will “forgive at least $108 billion in student debt in coming years,” largely due to the income-based nature of the Obama programs:

The GAO estimates that $137 billion… won’t be repaid. Most of it — $108 billion — will be forgiven because of borrowers fulfilling their obligations under income-driven repayment plans. The $108 billion only covers loans made through the current school year, however. The overall sum could continue to grow alongside enrollment increase.

The other $29 billion will be written off because of disability or death, the GAO projects, the only other circumstances under which the government takes a loan off its books. The government can garnish wages and Social Security checks for those in default.

The federal government’s student loan program currently lists an outstanding debt of $1.26 trillion. Of that, students enrolled in the new income-based repayment plan owe $355 billion, of which the GOA is projecting $137 billion will never be paid due to death, disability or inability to pay. That is a lot of money that the U.S. Treasury will never, ever see again.

This may seem like a lot of money to the average American (which it is), but per the report’s “scathing review” of the accounting practices employed by the Department of Education to crunch the numbers, the original costs were “understated… by tens of billions of dollars.” How so? Because they “failed to account for inflation when estimating borrowers’ future earnings” and “further increases in enrollment in income-driven repayment plans.”

(Via Wall Street Journal)