Did the Obama administration commit ‘the biggest accounting fraud in history’ with student loans? Experts weigh in The Wall Street Journal’s editorial board (WSJ) recently suggested that the Obama administration pulled ,
Off “the biggest accounting fraud in history” with student loans when eliminating the role of private lenders in the federal student lending market. Experts who spoke with Yahoo Finance acknowledged the issue with the general policy in hindsight, though they disagreed on who exactly is to blame.
In 2010, Democrats “nationalized the market to help pay for Obama Care,” WSJ asserted. “The Congressional Budget Office at the time forecast that eliminating private lenders would save taxpayers $58 billion over 10 years.
The WSJ op-ed also highlighted the rising number of severely delinquent student loans since then and blamed the Obama administration for expanding plans in 2012 for new borrowers “to reduce defaults,
Buy off millennial voters and disguise the cost of its student-loan takeover.” The editorial board then added: “This may be the biggest accounting fraud in history.”
WSJ argued that eliminating private lenders from the student loan market severely hurt Americans and that by using fair-market accounting,it becomes clear that student loans will actually cost taxpayers nearly $307 billion over the next 10 years.
Douglas Holtz-Eakin, former director of the Congressional Budget Office (CBO) during the George W. Bush administration and currently president of the center-right American Action Forum,
Agreed that the accounting discrepancy manifested because of the “technique” used by the CBO to evaluate the cost of these loan programs.“A widely known deficiency of the Federal Credit and Reform Act is that it does not allow the CBO to incorporate [market risk] into assessments,”