By the Department of Education’s own estimates, the Biden loan forgiveness plan will cost $305 billion over a decade. But the actual cost remains unknown. Even good faith estimates, such as the one from Wharton School of Business that put the cost of the plan between $300 billion and $980 billion, provide a vast range. At best, that $305 billion figure that the department selected may have been at the very low end on the range of credible estimates.
Even more troubling, the department’s inspector general asked KPMG to review the official estimates (and other aspects of the department’s finances), and the accounting firm concluded that the department’s leadership “was unable to provide adequate evidential matter to support certain key assumptions used to estimate the subsidy costs.”
KPMG raised particular concerns around the estimate of the “take-up rate,” stating that, “inadequate controls over the relevance and reliability of the underlying data used to develop the estimate calculations increases the risk that the financial statements could be materially misstated.” In other words, they’re guessing (or at least not showing their work) and they might not be doing so in good faith.
While this is pretty strong language for an accounting firm, KPMG ultimately steered clear of providing its own estimates, and instead recommended the development of a better process for coming up with more accurate estimates. Chairwoman Virginia Foxx (R-NC) of the Education and Workforce Committee was a bit more blunt and suggested that the “Department is blatantly lying about how much taxpayer money it is giving away.”
Obviously, this is not the first time government financial estimates have come up short, including with regard to the student loan program. After all, federal direct lending to students was supposed to make enough money to be able to offset other spending, but once that money was spent and changes to the program were enacted without Congress, it actually turned out that student loans now cost taxpayers money. And this was before the billions the Biden administration pushed out the door on Public Service Loan Forgiveness, Borrower Defense to Repayment, and more, and didn’t even take into account the ongoing repayment pause that is likely costing taxpayers somewhere in the neighborhood of $5 billion per month.
What this audit really drives home is the unconventional nature of the loan forgiveness program. Congress has considered and refused to grant loan forgiveness, and so a federal agency is just doing it anyway, without providing accurate estimates about the cost. The Department of Education has not asked the public for input on its program design, cost estimates, or whether it is a good idea in the first place. Worse, they knew they did not have this authority (President Biden himself has said so) but moved forward in the hope that they could get a political win and maybe even get away with it in court if there were no plaintiff with standing.
While most Republicans usually save their righteous anger for policy issues other than education, this time is different. The loan forgiveness plan has invigorated conservatives and even moderates because the effort seems so out of bounds with regards to constitutionality, fiscal responsibility, and even basic fairness to those without a college education, who now must pay off the debt of those who went to college. Chairwoman Foxx and many others in Congress have been vocal, but it is even more surprising that five former secretaries of education—DeVos, Spellings, Paige, Alexander, and Bennett—filed an amicus brief led by the Defense of Freedom Institute in support of the cases before the Supreme Court. The stakes are high, not only for this plan (whatever its true cost may be), but also for the other ongoing forgiveness efforts and countless other examples of executive overreach, all of which may face scrutiny if the loan forgiveness plan is struck down.
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