Risks On Gov’t Loans Issued Next Fiscal Year Will Cost Taxpayers More Than $65 Billion, CBO Says

The lifetime costs of new loans and guarantees issued in Fiscal Year 2025 are expected to cost taxpayers more than $65 billion, bolstered by lending initiatives implemented by the Biden-Harris administration, according to the Congressional Budget Office (CBO).

The losses on the administration’s loans are nearly double the $36.5 billion in risk costs that were estimated for Fiscal Year 2020 — the last full fiscal year before President Joe Biden took office, CBO data shows. The increase follows a variety of Biden-Harris initiatives that have boosted either loan issuance or loan forgiveness, such as the Inflation Reduction Act and the president’s student loan forgiveness plan.

The expected losses come primarily from student loan lending, with the CBO estimating approximately a quarter of student debt issued next year — $22.1 billion worth —  will not be repaid. The Biden-Harris administration’s August 2023 SAVE Plan cut undergraduate loan payments from 10% of discretionary income to 5% and provided loan forgiveness for borrowers whose original principal balances were $12,000 or less.

Loans issued by the Department of Energy (DOE) are also expected to fuel the losses, accounting for $13.5 billion, with nearly a quarter of the DOE’s new loans and loan guarantees written off as losses. In Fiscal Year 2021, before Biden signed the Inflation Reduction Act, which committed $370 billion to combat climate change, energy lending was not a significant enough factor to be included in the CBO’s report.

Despite already being expected by the CBO to be nearly double the lifetime loss on federal lending seen under former President Donald Trump, the loss could end up being much greater as the Federal Housing Administration (FHA) has masked potential defaults by reducing or waiving mortgage payments for approximately 2 million homeowners since 2021, according to a November 2023 FHA press release. The mortgages represent roughly a quarter of the FHA’s entire 7.5-million-home portfolio.

The U.S. national debt sat at $35.34 trillion as of Sep. 9, 2024, compared with $27.75 trillion on January 20, 2021, the day Biden took office, according to U.S. Treasury data.

The over $65 billion figure is in contrast to an estimated lifetime cost of just $2.4 billion estimated by the government under the Federal Credit Reform Act of 1990, which does not take into account the “fair value” of the loan, equating to the market risk it produces.

The White House did not immediately respond to a request for comment.