Education Dept. Student Loan Projections Off By $311B

Bad assumptions on the part of the Department of Education led to federal student loans costing the government $197 billion since 1997 — instead of making $114 billion.

Federal student loans were “originally estimated to generate $6 in income per every $100 disbursed” but they’re actually “expected to cost the government almost $9 for every $100 disbursed.”

That’s quite a miscalculation.

The GAO found by looking through the Department of Education’s budgets over the years that about 61 percent of the bad accounting was due to these faulty assumptions, like incorrect estimates on the economic standing of borrowers, underestimating the likelihood of borrower default, and underestimating the percentage of borrowers who would enter income-driven repayment plans.

The Direct Student loan program, which is the largest federal student loan program, accounts for about $1.4 trillion of the $1.7 trillion in outstanding student loans, The Daily Signal reported.

By Adam Andrzejewski for RealClearWire