Student debts to be forgiven? United States to forgive $108 billion debt for students

Kaye Garcia Friday, December 02, 2016

U.S. President Barack Obama speaks before he signs a presidential memorandum on reducing the burden of student loan debt in the East Room of the White House in Washington, June 9, 2014. | Reuters/Larry Downing

The U.S. government will forgive at least $108 million in student loans over the next 10 to 20 years.

The Government Accountability Office revealed the figure in a report released on Wednesday, Nov. 30. It highlighted that the cost of the student loan repayment programs is much higher that estimates from the Education Department.

Aimed at helping ease the financial burden of paying student debt, the Obama administration has implemented programs that set monthly loan payments to a percentage of income and forgive the balance after a period of 10 to 20 years.

Such income-driven repayment plans have become popular, with enrollment increasing each year. This also means that the cost of supporting such programs has risen, fueling many to criticize that the plans have become too expensive for taxpayers to shoulder.

In its report, GAO called out the Education Department for its faulty method in projecting the cost of the student debt relief programs.

GAO pointed out that one of the erroneous assumptions by the department is that the borrowers' incomes will not grow with inflation and that borrowers will not try out various payment plans.

"Some uncertainty is unavoidable when anticipating long-term loan costs," the report from GAO read, adding, "But we found numerous shortcomings in Education's estimation approach and quality control practices that call into question the reliability of its budget estimates and affect the quality of information Congress has to make informed budget decisions."

The Washington Post reports that in a letter addressed to GAO, Amy McIntosh, a deputy assistant secretary of the Education Department, recognized the need to improve their approach and that they are working on revising their estimates.

"The life cycle of a student loan is exceedingly complex, with a multitude of projection paths and outcomes," McIntosh stated, adding, "We are constantly seeking to enhance and refine our cost estimation models."