On Tuesday, July 28 the Congressional Budget Office (CBO) released a new cost estimate — adjusted for the cost of market risk — that would result from the President’s proposal to move the originations of all federal student loans solely to the government-run Direct Loan Program, as outlined in H.R. 3221, the Student Aid and Fiscal Responsibility Act of 2009.

CBO found that after accounting for the cost of market risk — the risk that defaults will exceed the original estimated rate — and administrative costs, the proposal to replace new guaranteed loans with direct loans would lead to estimated savings of about $47 billion over the 2010–2019 period — about $33 billion less than CBO original estimate for the Student Aid and Fiscal Responsibility Act of 2009.

More information

CBO letter to Senator Judd Gregg, Ranking Member on Senate Budget Committee (PDF, 504KB)