NEW YORK ( MainStreet) — It's bad enough that student loans are so expensive. But what's worse is the notion that borrowers whose federal loans are in repayment plans may be paying too much. Bedeviled by the details — especially the interest rate they're being charged — borrowers often find it impossible to get a reliable number for what it will cost to retire their loans.

Now a report by the General Accountability Office (GAO), an independent Congressional agency that identifies waste and inefficiency in government, has concluded that it really is next to impossible to set interest rates on federal student loans in advance so that the eventual pay-off amount can be accurately predicted. The February 3 report, "Federal Student Loans: Borrower Interest Rates Cannot Be Set In Advance to Precisely and Consistently Balance Federal Revenues and Costs," was produced as part of the deal Congress made last summer to cap interest rates on federal student loans at 3.85%--but tie them to the rising rates of the 10-year Treasury Bill.

Many industry observers already knew that these interest rate calculations are complex. But the GAO report underscores the risk to borrowers—especially when loans take decades to pay off.

Direct loans from the Department of Education (ED) come in three flavors: subsidized Stafford loans, unsubsidized Stafford loans and PLUS loans. Subsidized Stafford Loans are available only to undergraduate borrowers with financial need.

Things fall apart when borrowers fall behind and have to renegotiate the terms of their loans. Interest rates begin to change and the loans can become more expensive.

"There are a variety of repayment plan options available to eligible student loan borrowers," the GAO report said. "Under the standard repayment plan, borrowers typically repay loans over a period of ten years."

But they GAO noted that repayment can go out to 25 years.

"By extending their repayment periods, borrowers may lower their monthly payments, but pay more over time," the GAO report continued.

The total costs associated with Direct Loans are in flux through the end of the loan's life cycle which takes several decades. "The borrower's interest rates that would generate revenue to exactly cover total loan costs would change over time," the report said.

Subsidized loans are especially volatile when it comes to determining costs, once borrowers fall behind and the payoff date is extended.

"Actual subsidy costs will not be known until all cash flows have been recorded, generally after loans have been repaid," the GAO said. "This may be as many as 40 years from when the loans were originally disbursed, because many borrowers do not begin repayment until after leaving school."

Simply put, the break-even rate for a loan can't be predicted. The rates eventually charged could easily be above the break-even rate--yielding a profit for the ED.