The cost of federal student loan programs has “exploded” in the last ten years, transforming them from what was expected to be  a “money-maker” for taxpayers to a “significant money-loser” for the federal government, according to a fiscal watchdog’s new report.

The programs over the past decade have cost hundreds of billions of dollars more than originally projected, a report by the Committee for a Responsible Federal Budget, states, citing new data from the Congressional Budget Office. The estimated federal cost of student loans from 2015 to 2024 has “increased by $340 billion — from a projected gain of $135 billion in the 2014 baseline to an expected loss of $205 billion in the 2024 baseline,” it says, adding that even the $340 billion cost is likely an “underestimate.”

Much of the cost surge can be attributed to the expanded use of income-driven repayment plans, the report adds, which allow lower monthly loan payments based on income and family size — and eventual loan forgiveness if there is a balance left at the end of the repayment period. President Biden made student loan forgiveness a top priority of his campaign and his time in office, but several of his administration’s policies have been tied up in court in recent months.

The report specifically calls out loans for graduate students, noting that in forward projections, graduate loans are “nearly as subsidized” as undergraduate loans, making up half the cost of new loans. 

Ten years ago, student loans were “projected to collect more in repayments and interest than they provided in loans,” the report notes, and the Congressional Budget Office in 2014 projected that loans issued between 2015 and 2024 would “ultimately generate $135 billion in net savings and receipts for the federal government.” Some $100 billion of that was “projected to come from graduate student loans, which both carried higher interest rates and were more likely to be repaid” than undergraduate loans. 

Yet ten years later, that’s not how the loans shaped up — as the loans from that time period are now estimated to lose $205 billion. 

Costs have “exploded” since 2014, the report says, which was “one of the first years that new borrowers were eligible for a new, more generous form of Income-Driven Repayment.” While a large chunk of the $340 billion cost was due to a pause in federal student loan payments and interest forgiveness during Covid, even forward projections on new loans are “expected to incur costs as well,” the report says. 

While loans in all repayment plans appear to be pricier for the government than previously believed, the “primary driver of the cost is from IDR,” the report says.

“As changes kept being made to IDR programs and enrollment patterns and income trends became clearer, the costs slowly increased,” it notes. “The Biden Administration’s recent rules making loans more generous, especially with the new IDR plan, appear to have significantly changed the estimates.” 

The report calls for reform in the IDR program, especially when it comes to graduate loans. “The majority of the IDR subsidy now goes to those with graduate student loans, who tend to ultimately have high lifetime income and go on to be in some of the wealthiest households in the country,” it states. 

Reforming graduate loans to make them cost-neutral could “generate over $100 billion in deficit reduction over the next decade,” it says.