Yahoo Finance Asks: "Did the Obama administration commit 'the biggest accounting fraud in history' with student loans?"

From Yahoo Finance:

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. This estimate was pure fantasy, and now we’re seeing how much.” 

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.” 

‘There’s no way around that’ 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," Holtz-Eakin told Yahoo Finance. 

“So the loans, when they're evaluated are evaluated as safer than they truly are, and thus, the losses are smaller than they may truly be. And there's no way around that — the techniques force you to do that.”

AND THEN THERE'S THIS:

Why College Became So Expensive

The story of the rising cost of college in America is often told through numbers, with references to runaway tuition prices and the ever-growing pile of outstanding student debt. 

The personal toll these trends have taken is hard to convey, but the anthropologist Caitlin Zaloom does so in her new book, Indebted: How Families Make College Work at Any Cost, which documents how the price of a college education has forced many middle-class families to rearrange their priorities, finances, and lives. 

In Indebted, Zaloom, a professor at New York University, draws on some 160 interviews she did with families who are taking on debt to pay for college, mixing in history of education policy and analysis of the financial morass students and their loved ones must navigate—including a close reading of the Free Application for Federal Student Aid, or FAFSA, form and the concept of family it promotes.