A new CBO study finds that graduate student loan borrowers are expected to receive the vast majority of loan forgiveness under income-based repayment programs
A CBO study released on Wednesday provides new insight into how much the federal government is expected to forgive in student loans through income-driven repayment programs. The agency also estimated the costs to the government of the plans, which forgive the remaining balance on a federal student loan after a borrower has made payments for 20 or 25 years.
— CBO sought to model what might happen to the roughly $1 trillion it expects the Education Department will lend to students over the next decade. Nearly half of those loan dollars — $490 billion — will be repaid through an income-driven repayment plan, CBO said.In total, more than $200 billion over the lifetime of the loans made in the decade, CBO estimated. That includes $40.3 billion forgiven for undergraduate borrowers and $167.1 billion forgiven for graduate borrowers.
— The loans repaid through income-driven repayment plans will be far costlier to the government than repaid through the standard repayment options , CBO found. Put simply, the agency said, “for every dollar disbursed, the government is projected to lose 16.9 cents for loans repaid through income-driven plans but gain 12.8 cents for other loans.”The impact of federal taxes on the amount of loan forgiveness borrowers receive at the end of 20 or 25 years.
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