The Trump Administration’s “frozen” student loan program may cost the federal government more than the cost of its predecessor, according to a new study from the American Action Forum.
The AAF found that the program’s $816 billion would likely need to be funded in a different way than the current $2.8 trillion in federal student loans, which is due to expire at the end of the month.
The group is calling on the administration to change its loan program and to “use the money to pay for the needs of Americans who have been denied credit.”
The AFA’s report, “The Failing Student Loan System,” was released Monday, and it argues that the current loan program is “designed to provide an income to a very few,” rather than “for the broader economy.”
It’s also calling for the administration “to end the FPL and move toward a free market student loan that can be easily serviced by people of all incomes.”
The group said the program would help students graduate with an estimated $20,000 of debt, and that it’s “not feasible” for the federal student aid office to continue the program because of the federal budget sequester.
“The administration has a choice to make,” said John Segal, president of the AAF.
“Either it can continue to provide billions of dollars in loans to students whose ability to repay is severely limited, or it can start to change the way the U.S. loan program works and offer a more efficient, fairer, and more equitable solution.”
The federal government’s student aid division has already taken steps to make sure the FSL program is available to more people, including allowing borrowers to consolidate loans and allowing them to choose repayment terms based on their income.
The FSL will be available for new students, those who graduate from high school, and students who have had at least three semesters of work experience.
The agency also said it would work with private lenders to help students who want to consolidate their student loans to lower the interest rates.
The program, which was established in the 1990s, is meant to allow students to use federal loans to finance college and career, and to ease the burden on students and their families by providing them with a financial cushion that they may not otherwise be able to afford.
The administration has also proposed ending the student loan forgiveness program, and said it will begin rolling back other programs such as the Pell Grant, which helps students attend college.
The Federal Reserve’s announcement last week that it would increase interest rates for federal student borrowers is a sign that the administration may be reconsidering the FFL program, Segal said.
“What they’re doing is giving them another shot at a higher rate,” he said.
“[The FFL] was designed to make it possible for them to get into the middle class.”