Does the Taxpayer Make or Lose Money on the Student Loan Program?

....It all depends on who you believe:

College students are caught in the middle of bipartisan bickering on Capitol Hill and could be left picking up the tab for lawmakers’ inaction. The interest rate on new, federally-subsidized student loans doubled Monday, to 6.8% from 3.4%, after Congress failed to pass legislation preventing the increase. 

The rate hike, which impacts government-backed Stafford loans, means the seven million new students expected to take out these loans will be facing a much bigger bill upon graduation. However, the stalemate surrounding college loans goes beyond setting the interest rate; a new debate is surfacing on just how much student loans cost taxpayers.

In June, the non-partisan Congressional Budget Office issued a report showing a $50.6 billion profit for the Department of Education on student loans. From 2013-2020, the CBO estimates the program will bring in profits of $160 billion, which includes the doubling of interest rates. Keeping rates at 3.4% would increase the government’s cost of the student loan program to $41 billion over the next 10 years, according to the report. 

The CBO calculates its estimates based on rules established by the Federal Credit Reform Act of 1990, and the cost of a student loan is recorded in the federal budget during the year it’s made. The government takes a hit when issuing loans, but the revenue from loan repayments is assumed to offset these initial costs. When calculating the cost of the loans, the CBO takes the up-front costs and subtracts future repayments.

[...] 

According to a Barclays research note, the government will lose money from 2013-2020 on the loan program. One of the major proposals gaining traction on Capitol Hill is tying the loan interest rate to annual market benchmarks instead of Congress-determined rates. “These losses would be exacerbated by several key policy proposals. In all, the total cost to the government over these years could exceed $100 billion,” according to the note.

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