Congressional Republicans seek details on costs amid moratorium on loan repayments
Among the requested documents is an internal report commissioned by Betsy DeVos, the former education secretary under the Trump administration, that paints a far more grim picture of taxpayers’ exposure to student-loan defaults than presented by the government.
Biden Education Department officials have disputed the findings of that report. In a congressional testimony last October, Richard Cordrey, head of federal student aid at the Department of Education, said “there is some question whether the methodology used in that particular report … was the most accurate.” In November’s testimony, James Quall, the undersecretary of education, told Ms Fox that the department would send the requested documents within a month, but that did not happen.
The Republican wrote in his letter to Education Secretary Miguel Cardona, “If you disagree with the reports, as Mr. Cordre believes, you must provide the report and contractors to discuss it and investigate problems in their methodology.” needed.”
“For months we have been asking the Department of Education to provide a report assessing the true cost of the federal student loan portfolio, but Secretary Cardona and those under her have withheld this,” Ms Foxx said in a statement.
The Education Department did not immediately respond to requests for comment.
When cash flow from student-loan programs doesn’t match expectations set out in the annual budget, other government accounts fund the difference outside of Congress’s appropriations process. The amount set aside for that purpose in the direct loan program, which accounts for the vast majority of student loans held by the government, has risen sharply in recent years, especially during the COVID-19 pandemic.
In fiscal year 2019, the Department of Education’s Federal Student Aid Office estimated the need for an infusion of $124.5 billion. In fiscal year 2021, this number had increased to $273.8 billion. Roughly two-thirds of that increase can be attributed to the current moratorium: the net cost of the pause came in at $98.4 billion for the 2020 and 2021 fiscal years. Annual Financial Report of Education Department,
The study, requested by congressional Republicans, was conducted in early 2020 by a former JPMorgan Chase & Company executive and has been seen by Businesshala. It found that Congress, several presidential administrations, and government oversight had systematically made student-loan programs profitable, while actually making defaults more likely.
It used a different method to calculate borrowers’ ability to repay loans and concluded they would pay $935 billion in principal and interest. That would leave taxpayers on the hook for $435 billion. All those estimates reflect pre-pandemic conditions.
The losses projected in that report are much sharper than prior government estimates, which typically measure how much the portfolio will cost the government over the next decade, not the entire life of the debt.
In its 2022 budget released last June, the Biden administration raised its estimate of a $53 billion loss on the federal government’s student-loan portfolio, reflecting lower repayment rates and pandemic-relief efforts. A year ago, the federal budget projected a loss of $15 billion on all outstanding student loans. The budget now estimates long-term losses of $68 billion.
The current pause on loan repayments and interest accruals has been extended several times, most recently in December when the administration pushed back the restart date from January 31 to May 1 due to an increase in Covid-19 cases from the Omron version. Gave.
Data from the Department of Education shows that about 43 million people owe $1.6 trillion in federal student loans. About 5.2 million borrowers are in default — meaning they’ve gone almost a year without paying — about $114 billion in student loans.
“Probably those not paying today would be in a better financial position, especially for workers with a college education, given the increase in savings over the pandemic,” said Adam Looney, who served as a Treasury Department official in the Obama administration. Those who were more likely to be able to work remotely.
In November, the Department of Education said it was terminating its relationship with private collection agencies tasked with recovering payments from defaulting federal student loan borrowers in order to improve collections and provide more support to borrowers. Was. It is in the midst of overhauling a student-loan forgiveness program to make it easier for more public sector workers to qualify for debt relief.
The department has also taken steps to forgive billions in debt held by borrowers with disabilities as well as borrowers who have gone to institutions that federal regulators say practice deceptive hiring practices.
Several Democrats, including Senate Majority Leader Chuck Schumer of New York and Sen. Elizabeth Warren of Massachusetts, have urged the Biden administration to forgive student-loan loans of up to $50,000 per borrower. Mr Biden has said he does not have the authority to forgo that amount and has not taken any steps towards broad-based loan forgiveness.
Write Gabriel T. Rubin at [email protected]