The U.S. government has reportedly underestimated the cost of the student loan program by a few hundred billion dollars.
“A new report from the U.S. Government Accountability Office finds the U.S. Department of Education miscalculated the cost of the federal student loan program.
From 1997 to 2021, the Education Department estimated that payments from federal direct student loans would generate $114 billion for the government. But the GAO found that, as of 2021, the program has actually cost the government an estimated $197 billion.
A percentage of that shortfall, $102 billion, stems from the unprecedented federal student loan payment pause that began under the CARES Act in 2020.
A bigger reason for the $311 billion difference, the report says, is that initial predictions did not account for the high percentage of borrowers who ended up enrolling in income-driven repayment (IDR) plans. About half of all direct loans are now paid through these plans, which are designed to help people who can't afford to make large monthly payments and which promise loan cancellation after 20-25 years. The GAO explains, "the monthly payment amount for borrowers in Income-Driven Repayment plans can change based on their economic situation." It's one of many reasons government costs around the program have been unpredictable.
IDR has also failed to live up to its promise to borrowers: A recent NPR investigation revealed that these plans have been badly mismanaged by loan servicers and the Department of Education. As a result, relatively few borrowers have actually succeeded in having their loans canceled through IDR”. -Sequoia Carrillo, NPR
That debt isn’t going to be repaid. Not when almost half of student loan borrowers are either deferring their student loan payments or are in forbearance.
Eliminating all student debts over $4,000 for those who attended public schools and $20,000 for those who attended private schools would make the remaining debts much more inexpensive going forward and would free young adults whose lives have been destroyed by crippling debt servitude.
The students who took out student loans were deceived and defrauded. The younger generation of Americans is saddled with massive amounts of student loan debt which cannot be discharged through bankruptcy.
Those who paid back their student loans and are resentful over the possibility that someone, somewhere, might be freed from debt slavery should keep in mind that the average annual costs for higher education have increased a significant amount since their college days.
The cost of college in 1964-1965
- Average cost of public school: $261
- Average cost of private school: $1,160
Even when adjusted for inflation, the average annual cost of college in 1965 would be just over $9,000 in today’s money.
Anyone who cares whether the younger generations can afford to buy homes or start families on a working-class income ought to recognize that student loan debt is intrinsically predatory.
If corporations are going to demand a worthless piece of paper for a job, then those worthless pieces of paper should be provided at an affordable cost.
There is simply no moral hazard created by eliminating student loan debt. However, if the government then proceeds to bail out the lender then it will be the bailouts, not debt cancellations, that are immoral and irresponsible.
As is always the case, the lender is the wrongdoer, not the borrower. This is why there is a moral obligation to free people who were convinced by their trusted elders to enter into tens of thousands of dollars in permanent debt at an age when they were considered too young and immature to be permitted to consume alcohol.
It’s predacious usery at its worst and it will cause the entire credit system to grind completely to a halt barring some form of student loan debt jubilee.
The history of debt and debt forgiveness reaches as far back as ancient Sumeria and Mesopotamia. Historical lawgivers such as Hammurabi, Moses, and Lycurgus were all noted for promulgating debt cancellations.
Yet during the time of the Second Temple period (516 BC - 70 AD), an age in which creditor power was gaining dominance throughout the ancient world, the Pharisees followed the teachings of Hillel the Elder.
Now credited as a founder of rabbinical Judaism, Hillel sponsored the "prosbul clause" in which creditors obliged their clients to waive their rights to have their debts canceled in the Jubilee year.
So, by way of explanation, debt forgiveness is not only biblical, but it is an absolute necessity if you plan on avoiding complete societal break down.
This is because growth and income can never keep up with compounded interest. It is a mathematical certainty. Debt always requires more debt. And, unless it is periodically forgiven, it will build indefinitely until its entire structure collapses and the creditor class owns everything.