Bonamici Warns Policymakers Not to Overstate Student Loan Costs and Dismantle Protections for Struggling Student Loan Borrowers

Congresswoman Responds to Government Report, Calls for Improved Cost Estimates for Income-Driven Repayment Plans

WASHINGTON, DC [12/02/16] — Today Congresswoman Suzanne Bonamici (D-OR), a member of the House Education Committee, released the following statement about the Government Accountability Office (GAO) report finding that the U.S. Department of Education’s cost projections for income-driven repayment plans are unreliable.

“The Government Accountability Office’s recent report on the federal government’s student loan program reveals that the Department of Education’s cost estimates are based on shaky methodologies,” said Congresswoman Bonamici. “More accurate projections would contemplate borrowers’ income trajectories, consider the barriers to participating in income-driven repayment plans, and factor in the variation among the terms of repayment plans, all of which could shift estimates by billions of dollars.”

The GAO’s report notes that the Department’s current cost estimates have doubled from previous projections, likely because of the increased participation in income-driven repayment plans. These plans permit student loan borrowers to make loan payments that are based on a percentage of their discretionary income. If borrowers have debt remaining after 20 or 25 years, it is forgiven. A separate program, the Public Service Loan Forgiveness Program, forgives federal student loan debt after ten years of qualifying public service. The GAO’s examination concluded that the Department’s estimates may significantly exaggerate or undervalue actual costs.

“I am concerned that many of the news stories and responses from members of Congress have narrowly focused on the cost of the estimated loan principal that may be forgiven in income-driven repayment plans,” Bonamici continued. “This limited focus overlooks the lower net costs of income-driven repayment plans, and it ignores the safety net these plans provide to people who, after decades, remain weighed down by student debt. Additionally, the Congressional Budget Office projections show that the federal student loan program overall will bring in roughly $80 billion over the next ten years. A sole focus on income-driven repayment ignores the fact that, overall, the program generates revenue.

“The real story is that policymakers don’t yet have the accurate information they need to make policy changes to income-driven repayment plans. I commend the Department of Education for accepting the GAO’s recommendations, and I encourage the Department to work with the next administration to produce more dependable cost projections without delay.

“Far too many students across the country are struggling with student loan debt, and Congress needs to pursue reasonable reforms to student loan repayment. If policymakers are serious about addressing this issue, we must also take into consideration soaring college costs and institutions that offer degrees and credentials of dubious value in the marketplace. This debate should include potential changes to income-driven repayment plans that are necessary to shield vulnerable student loan borrowers from default while making income-driven repayment a sustainable option in the long run.

“But acting without improved cost estimates is premature. It would be detrimental to students across the country – and could leave millions of indebted Americans out in the cold – if policymakers impose drastic reforms on repayment programs based on insufficient or inaccurate information."

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