Student loans: Education increased federal cost estimates for direct loans by billions due to program and other changes

What GAO found

While the Department of Education originally estimated that direct federal loans made over the past 25 years would bring billions of dollars in revenue to the federal government, current estimates suggest that these loans could cost the government billions of dollars. indicates that it costs The institution initially estimated those loans would bring her $114 billion in revenue to the government. The actual cost will not be known until the loan term expires, but as of fiscal year 2021, these loans are estimated to cost the federal government $197 billion. This $311 billion change was driven by both program changes and re-estimations using revised assumptions (such as economic factors and loan performance) as additional data became available. (see illustration).

Estimated cost or revenue of direct loans made initially and in the current (fiscal 2021) fiscal years 1997-2021

Estimated cost or revenue of direct loans made initially and in the current (fiscal 2021) fiscal years 1997-2021

The largest increase in estimated costs, totaling $102 billion, comes from the emergency relief provided to most federal student loan borrowers under the CARES Act and related administrative actions in response to the COVID-19 pandemic. This relief included (1) all due payments, (2) accrual of interest, and (3) suspension of involuntary collections on defaulted loans. The suspension is a program change that dates back to March 13, 2020 and is currently scheduled to expire on August 31, 2022. Re-estimating based on updated data and assumptions about income-driven repayment plan borrowers also increased estimated costs significantly.

Among the factors that make estimating the cost of direct loans difficult are the lack of historical data when new program changes are introduced and the assumptions that education must be made about borrower behavior over the life of the loan. I have. For example, monthly payments for income-driven repayment plan borrowers may vary based on their financial circumstances. Using a hypothetical group of borrowers, GAO found that unpredictable borrower income growth and inflation affect borrower payments. For example, the GAO found that when income growth slowed, borrowers paid less to the government, increasing government costs.

Why GAO did this study

Direct loan programs have grown in size and complexity over the past 30 years, with outstanding federal student loans reaching approximately $1.4 trillion. The Direct Loan Program provides financial assistance to students and their parents to help pay for post-secondary education. The GAO was asked to review changes in Education’s cost estimates and the factors contributing to them.

This report examines how and why Education’s direct loan cost estimates have changed over time. The GAO reviewed budget documents and data covering direct lending made from FY1997 through FY2021. GAO also performed a model-based analysis on a hypothetical group of borrowers initiating repayments to show how changes in economic assumptions affect both repayment plan choices and estimated loan payments. rice field. In addition, GAO interviewed education budgeters about their process for estimating student loan costs and how these estimates are calculated and documented.

A future report will examine how governments and the private sector estimate the cost of direct financing by educational institutions.

Education provided written comments with additional context for some factors contributing to the revised estimates. GAO does not make recommendations.

For more information, contact Melissa Emrey-Arras ((617) 788-0534) or, Cheryl E. Clark ((202) 512-9377) or, or Lawrance L. Evans, Jr. Please contact (202) 512-4802 or

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