The federal student-loan programs are designed to generate revenue for taxpayers, and they do. But surging enrollment in the debt-forgiveness programs recently prompted the government to increase by $22 billion its estimate of the long-term costs of the provisions. And a recent move to expand the most generous repayment program to millions more borrowers will cost an estimated $15.3 billion.
Critics say offering unlimited loans to students, with the prospect of forgiveness, creates a moral hazard by allowing borrowers to amass debts they have little hope or intention of repaying, all while enriching institutions and leaving taxpayers to pick up the tab.
Sen. Lamar Alexander (R., Tenn.), chairman of the committee overseeing education, has proposed reinstating loan limits for grad students as part of an overhaul of education policy that could face votes later this year.
The typical college student who borrowed owed about $27,000 upon graduation in 2012, according to an analysis of federal data from the New America Foundation, a centrist think tank. Those earning a master’s typically owed between $50,000 and $60,000; law degrees, $141,000; and medical degrees, $162,000.More data from the Federal Reserve.