Sunday, February 16, 2020

The Great Student Loan Writedown: The cost of forgiving debt keeps growing and growing and . . .

WSJ editorial. Excerpts:
"From 2010 to 2017, the share of all borrowers repaying direct loans through these plans (income-based repayment plans) increased to 27% from 10%. The plans have especially caught on with graduate students with large balances. About 56% of debt disbursed to graduate students is being repaid through these plans."

"In 2012 the agency forecast that student loans would turn a $219 billion profit for the government over 10 years. Now it projects they will cost the government $11 billion through 2029—using the government’s fictitious accounting that doesn’t consider borrower risk. Under fair-value accounting standards that businesses use, loans are forecast to cost taxpayers $263 billion.

Perhaps this seems like a bargain as Bernie Sanders promises to cancel all $1.6 trillion in outstanding student debt. The scary thing, as the Obama Administration showed by refinancing hundreds of billions of dollars in loans, is that a President Sanders might not even need Congress to do it."

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