Ed Dept. Analysis Projects $435B in Student Loan Losses
A new analysis conducted for the U.S. Department of Education puts the amount of money the federal government stands to lose on its student loan portfolio in roughly the same ballpark as the amount private lenders lost on subprime mortgages during the 2008 financial crisis.
The Department of Education hired FI Consulting for projections examining $1.37 trillion in student loans that the government held at the beginning of the year, The Wall Street Journal reported. Another consultant, Deloitte, reportedly reviewed FI Consulting’s modeling.
Borrowers can be expected to pay back $935 billion in principal and interest, the analysis found, which leaves $435 billion in government losses, according to the Journal. That’s 80 percent of the amount private lenders lost on subprime mortgages during the financial crisis, $535 billion.
Loans in income-based repayment programs drove projected losses.
The analysis didn’t include loans from private lenders that are backed by the government.