Outstanding Balance on Federal Student Loans Tops $600 Billion--Up 250% Under Obama

May 15, 2013 - 2:48 PM

President Barack Obama

President Barack Obama at the Hampton University graduation ceremony in 2010. (AP Photo)

(CNSNews.com) - The outstanding balance for all of the direct student loans the federal government has issued topped $600 billion in April, according to newly released data from the U.S. Treasury.

The total balance hit $600.457 billion by the end of April, says the Treasury, up from $592.142 billion at the end of March.

The Federal Direct Student Loan Program already has built-in debt forgiveness plans for people who end up earning low incomes or for those who entered lines of work preferred by the government.

In January 2009, when Obama was inaugurated, the balance was $119.803 billion and has since increased more than fivefold.

The $480.654 billion increase since January 2009 in what is owed to the Treasury in direct student loans represents a climb of about 250 percent in just over four years.

Before Obama's first term, federally guaranteed student loans were made both by the government directly and by private lenders using their own capital through what was called the Federal Family Education Loan program. Language inserted into the the Obamacare law signed in March 2010, however, abolished the latter type of federally guaranteed student loan, giving the U.S. Treasury a monopoly over those loans.

As the Congressional Research Service has described it, this Obamacare provision made the U.S. Treasury the exclusive "banker" for federally guaranteed student loans. Thus, U.S. taxpayers essentially own these loans.

"The DL [Direct Loan] program uses a different administrative structure and draws on a different source of capital than was used in the FFEL program," said a CRS report published earlier this year. "Under the DL program, the federal government essentially serves as the banker--it provides the loans to students and their families using federal capital (i.e., funds from the U.S. Treasury), and it owns the loans."

If the students who have borrowed the current outstanding balance of $600 billion in federal direct student loans default on those loans--or if Congress forgives them their debts--the burden of that $600 billion loss will fall on U.S. taxpayers.

According to the Congressional Research Service, the federal student loan program maintains what it calls an "Income-Contingent Repayment Plan." This includes "the prospect of debt forgiveness for those who experience prolonged periods with low incomes."

Additionally, says the Congressional Research Service, federal direct student loans are "forgiven, cancelled or repaid as an incentive for entering certain occupations or professions, or for performing certain types of public service."