Assuming the panel approves these rules eventually, they will cost taxpayers $575 million a year, according to the Congressional Budget Office's scoring of the 2010 law. Once in effect, borrowers will not have to pay more than 10% of their "discretionary income" each year, regardless of how much they owe. The government defines discretionary income as the difference between the borrower's adjusted gross income and 150% of the federal poverty line. If the money isn't completely paid back in 20 years, the remaining debt will be forgiven.
That's right. Wait 20 years and, presto, you're student debt-free.
Remember, student loans from the government are available regardless of credit history or assets, so default rates are high and have been rising—to 8.8%, according to the most recent government data. Add the possibility that people can choose or end up in occupations that pay low salaries, and the taxpayer loses again. A student who finances an expensive education and then pursues a career with meager salaries could be sticking taxpayers with five- or even six-figure losses by year 20. The loan then becomes a very expensive grant.
It gets even more expensive for taxpayers when student borrowers take a "public service" job after graduation, thanks to a program that began in 2007. "Public servants" can get all of their remaining federal student-loan debt forgiven after only 10 years. This applies to government employees such as teachers and to workers at nonprofits.