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$108 Billion in Student Debt Is Likely to Be Forgiven, Government Says

In a report released on Wednesday, the U.S. Government Accountability Office said the federal government would forgive at least $108 billion of student debt in the coming years, an amount higher than expected.

The office also said the Department of Education’s method of forecasting the cost of its income-driven repayment program does not “ensure reliable budget estimates,” because, among other things, it does not factor in inflation.

The report looks at borrowers in such plans, an option created in the 1990s but expanded and popularized by the Obama administration as a way to prevent low-wage earners from defaulting. In income-driven repayment, borrowers put 10 to 20 percent of their monthly discretionary income toward repaying their student loans. After 20 or 25 years, any remaining balance is forgiven. By contrast, borrowers in standard 10-year repayment plans pay off their loans mortgage-style.

As of June, 5.3 million borrowers were in income-driven repayment plans, a number that has more than tripled in the past three years, The Wall Street Journal reported. Those borrowers owe about $352 billion in student-loan debt. Of that sum, the GAO expects that $215 billion will be repaid and $29 billion discharged as a result of death or disability. The remaining $108 billion will be forgiven.

Because the report’s estimate includes borrowers only through 2017, however, the amount of loan forgiveness will change as time goes on and more borrowers participate.

The report was requested in June 2015 by Sen. Michael B. Enzi, Republican of Wyoming, who is chairman of the Senate Budget Committee. In a letter to the GAO that month, noting that more borrowers were participating in income-driven plans, he asked for a report to “address concerns about the uncertainty in the long-term subsidy costs.”

The study found that the increase in the number of participating borrowers was due in part to greater awareness of the income-driven plans.

President Obama has proposed capping the amount of loans that can be forgiven at $57,500, but the cap has not been put into effect. While campaigning, Donald J. Trump expressed support for income-driven repayment plans and proposed setting the repayment rate at 12.5 percent of income — it’s unclear if he meant discretionary or total income — and granting forgiveness after 15 years.

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