Much of the debate about student loans is framed in terms of financial statistics

This means that some of Mark’s loan proceeds are also being used to subsidize undergrads and less profitable departments

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Graduates wait in line to cross the stage during La Salle University’s Class of 2021 commencement at Lincoln Financial Field in Philadelphia, .

We hear that we have $1.6 trillion of debt outstanding, or that the income-driven repayment programs might cost taxpayers $100 billion or more, or that there’s a $500 billion hole in the system, or that canceling $50,000 of debt per person might cost $1 trillion.

Estimates like these purport to frame contested policy choices in terms of hard dollars, with the clear inference that policies like one-time student loan cancellation or expanded income-driven repayment programs are simply unaffordable

There’s only one problem: These numbers are made up. They are mere artifacts of a series of policy and modeling choices, with little basis in the reality of personal or public finance, or the costs and benefits of higher education. There are real dollars involved, to be sure, but quoted dollar amounts like those above are based on a lie-really a series of lies.

This matters because the policy choices we make now will transform these fake numbers into real ones. If the law demands repayment of $x from a student borrower, that becomes a very real cost that can impact their life for ount. The legal institutions and moral obligations of debt have significant power to turn hypothetical cash flows into real obligations, without us even realizing what’s happening.

WHAT ARE THE LIES that lead to these fictional numbers? First, the calculations of overall student debt treat the cost of a student’s education as equal to a school’s net tuition charge, even though net tuition is a highly variable number across schools and students. Second, the government inflates the amounts borrowed using arbitrarily high interest rates subject to a series of deeply complex and opaque rules. And third, federal budgeting uses a cost methodology that grossly overstates how much taxpayers will pay for student loans, and masks that the government is likely still making a profit from them, even those that they may someday cancel.

To break this down, let’s follow an example. Mark is a law student who owes $50,000 per year in tuition, and he uses a combination of Direct Loans and Grad PLUS loans to pay it (he may also need to borrow more to cover living costs, but let’s put that aside). But what does that tuition number represent? Only part of it is the cost of paying for the education he actually receives. Some of Mark’s tuition payment will subsidize grants and financial aid for other law students. And law schools that are part of universities can contribute 30 percent of their revenue or more to the rest of the university. Simply put, schools fund a large part of their operations on the backs of full-paying (and full-borrowing) students. In essence, Mark has unwittingly agreed to become personally liable for money used to help fund the entire higher-education sector.

But at least tuition dollars reflect the real costs of higher education, even if not the cost of educating Mark in particular. But what happens next is just the engineering of additional debt out of thin air, with little relationship to the cost of educating Mark, or anyone else.

Let’s say Mark graduates with $150,000 in debt. As he attends school, it has already been accruing interest. For Grad PLUS loans, the current interest rate is 6.3 percent, set by statute to be 4.6 percent above the ten-year Treasury note yield. This rate has little to do with the specifics of Mark’s creditworthiness; it is hard-coded into the law to create profit for the lender (which since 2010 has always been the federal government).

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