Politics

Unpaid Student Loan Debt Adds $21 Billion To Federal Deficit

| by Edward Arnold

Deep inside President Obama's 2016 budget lies a staggering number: $21.8 billion. That is how much debt American student borrowers accumulated in 2014 -- the largest ever recorded for a government credit program.

According to Politico, the main reason this has occurred is because of President Obama's recent efforts to provide relief to student borrowers by allowing them to reduce their payments to 10 percent of their income. Those efforts have reduced loan payments, but have reduced the amount of money repayed to the federal government in the short term. The result, for this year, anyways, is another $21 billion added to the deficit.

"The news that existing income-based repayment programs have dramatically raised the cost of federal student loan programs should not surprise anybody," American Enterprise Institute education expert Andrew Kelly told Townhall. "The programs provide extremely generous benefits to borrowers in the form of loan forgiveness but do nothing to ensure that students have incentive to invest in affordable, effective programs on the front end. These benefits also provide colleges with even less incentive to keep their tuition low and leave taxpayers footing the bill for increasingly expensive degrees that may or may not have any value." 

Currently, about 40 million Americans hold a collective $1 trillion in  student loan debt. With higher education costs, it is expected to only get worse. Of the $1 trillion, $740 billion is federal money.

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Government loans have increased 44 percent over the past two years, increasing the government's credit portfolio to $3.3 trillion, more than any financial bank. And about 17 percent of those loans are in default, leaving taxpayers wondering where their money is going.

Still, the administration claims that student loans will make a profit for taxpayers over ten years.

Sources: Politico, Townhall / Photo Credit: White House