Federal student loan loss forecast increases by $ 53 billion
WASHINGTON – The Biden administration noted an estimate of losses on the federal government’s student loan portfolio of $ 53 billion, reflecting falling repayment rates and efforts to fight the pandemic.
The new estimate, contained in the administration’s draft budget for the fiscal year that begins in October, is based on updated data on how much the country’s 43 million student borrowers have sent to the government in recent years. years to repay their loans.
A year ago, the federal budget predicted that taxpayers would ultimately lose $ 15 billion on outstanding student debt, which currently stands at $ 1.6 trillion. The administration’s proposed $ 6 trillion budget now projects long-term losses to $ 68 billion.
These estimates are still well below the losses projected in an internal analysis conducted by officials appointed by Betsy DeVos, who was President Donald Trump’s education secretary, which showed that taxpayers would ultimately be at the mercy of about both. third of the $ 1.6 trillion in students. debt portfolio.
This analysis was based on different assumptions about how quickly borrowers’ incomes would increase, the number of defaults on their loans, and the amount of debt that would ultimately be forgiven through income-based repayment plans, which set monthly payments at a percentage of a borrower’s income and write off balances after 20 to 25 years of payments.