The Biden-Harris Administration's lending plan is expected to cost taxpayers more than $65 billion in lifetime costs for new loans and guarantees issued in fiscal year 2025, according to the Congressional Budget Office (CBO).
Losses from government loans are nearly double the cost of risk, which was $36.5 billion. Estimation CBO data for fiscal year 2020, the last fiscal year before President Joe Biden took office. showThis increase follows various efforts by the Biden-Harris Administration to boost either loan issuance or loan forgiveness, including the Control Inflation Act and the President’s Student Loan Forgiveness Plan. (Related: Report: $84 billion worth of manufacturing projects subsidized by President Biden fall flat)
The expected losses will come mainly from student loan lending, with the CBO estimating that roughly a quarter of student loans issued next year, or $22.1 billion, will not be repaid. SAVE Plan It reduced undergraduate loan repayments from 10% to 5% of disposable income and forgave loan payments for borrowers with original principal balances of $12,000 or less.
CBO estimates the costs of federal credit programs in 2025 in two ways: by following the procedures set out in the Federal Credit Reform Act and by using a fair value approach to measure the market value of the government's obligations. https://t.co/jdtdKZRndS
— US CBO (@USCBO) August 30, 2024
Loans issued by the Department of Energy (DOE) are also expected to increase losses, accounting for $13.5 billion, with nearly a quarter of DOE's new loans and loan guarantees being written off as losses. Energy loans were not a significant enough factor to be included in the CBO forecast in fiscal year 2021, before Biden signed the Inflation Control Act and committed $370 billion to climate change efforts. Report.
The CBO is already projecting lifetime losses on federal loans to be nearly double those seen under former President Donald Trump's administration, but the losses could be much larger as the Federal Housing Administration (FHA) masks potential defaults by reducing or forgiving mortgage payments for about 2 million homeowners since 2021. According to According to a November 2023 FHA press release, these mortgages account for roughly one-quarter of FHA's 7.5 million mortgages. portfolio.
According to data from the U.S. Treasury Department, the U.S. national debt will be $35.34 trillion as of Sept. 9, 2024, down from $27.75 trillion on Jan. 20, 2021, when Biden took office.
The figure of more than $65 billion contrasts with the government's estimated lifetime cost of just $2.4 billion under the federal Credit Reform Act of 1990. This estimated cost does not take into account the “fair value” of the loans, or the market risk they create.
The White House did not immediately respond to a request for comment.
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