Bad Accounting: Uncle Sam the Student Loan Shark

According to USA Today, this is when using special government loan accounting rules that reduce the risk. But people still default, even on loans that cannot be discharged by bankruptcy. For example, if you take a few classes in a community college for the rest of your life, you’ll never pay them back. When the risk is accounted for, the government only made $6 Billion.

For the next ten years, the CBO says that the student loan program can be expected to make $135 billion for the government under government accounting rules. But under fair-value rules, which probably account better for risk, the program will cost $88 billion.