The Obama administration's student loan program had a shortfall of nearly $22 billion in 2014–the largest of any government credit program in history.
— Michael Grunwald (@MikeGrunwald) February 5, 2015
Politico reported Thursday that the shortfall comes from Obama's debt relief offered to borrowers with large student debt.
For more than two decades, budget analysts have recalculated the projected costs of about 120 credit programs every year, but they have never lowered their expectations of repayments this dramatically. The $21.8 billion revision—larger than the annual budget for NASA, or the Interior Department and EPA combined—will be tacked onto the federal deficit.
The 40 million Americans with student loans are now saddled with more than $1.2 trillion in outstanding debt. And with higher education costs rising much faster than inflation, the already massive program has been growing at a spectacular clip; direct government loans alone increased 44 percent over the last two years despite an aura of austerity in Washington.
The Obama administration has tried to ease the burden for some borrowers by reducing their payments to 10 percent of their income and forgiving their loans after 20 years; this year, the Education Department plans to make all borrowers eligible for that "pay-as-you-earn" relief.
All of that shortfall will be added to the national deficit, and because of "a quirk in the budget process for credit programs, the department can add the $21.8 billion to the deficit automatically, without seeking appropriations or even approval from Congress."
The ever-deluded administration is convinced that there will not be a shortfall, though–compared to the Department of Education's $740 billion in loans, the $22 billion shortfall is a drop in the bucket.
But administration officials said there’s no reason to think this year’s shortfall will recur. They believe that their budgets going forward will accurately reflect their new efforts to help borrowers limit their payments, that pay-as-you-earn will be "baked into the cake." Historically, re-estimates for the better and for the worse have tended to cancel each other out across the government.
In fact, this year, the government’s credit portfolio increased to $3.3 trillion, larger than any U.S. bank’s, but the re-estimates for all the programs besides student loans netted out to less than $1 billion.