Recently, President Biden promised to cancel $10,000 of student loans for low- to middle-income borrowers. This would cancel approximately $300 billion of student loan debt that has been financed by the federal government.
President Biden pointed out that the federal student loan debt “is a significant burden on America’s middle class.” But the amount owed by current and former students is reported as an asset on the federal government’s balance sheet. As indicated by the Data-z chart below, in 2008 the government reported a student loan asset of $135 billion and that amount has ballooned to $1.6 trillion.
Truth in Accounting doesn’t advocate for any specific spending policies, including student loan forgiveness. But I have argued for years that the likelihood of the cancelation of student loan debt is a great deal higher than the likelihood of the cancelation of Social Security and Medicare benefits. But the student loans are reported as an $1.6 trillion asset on the federal government’s balance sheet, while the promised $41 trillion in Social Security benefits and $55 trillion in Medicare benefits are not reported as liabilities. This accounting suggests that the Federal Accounting Standards Advisory Board (FASAB) believes seniors will not receive the benefits they have been promised. By putting student loans on the balance sheet as an asset, the government assumes current and former students will pay their student loans instead of being forgiven.
FASAB has determined that the federal government should not report Social Security and Medicare liabilities on its balance sheet, because Congress can change the law at any point to reduce or even eliminate the benefits. But as we are seeing now, student loans can be canceled or even eliminated by changing the rules or laws, yet these loans are reported as an asset on the federal balance sheet.
Therefore the Social Security and Medicare debt should be reported as liabilities making our national debt more than $140 trillion, not the $31 trillion reported.
If assets on the books can be canceled, then liabilities that can be canceled should also be on the books, in the interest of full transparency and truthful accounting.