According to a letter released by the Congressional Budget Office (CBO), President Obama's plan to end the government-guaranteed Federal Family Education Loan Program (FFELP) could save the Treasury less money than the administration suggests. The new figures estimate that under certain risk assumptions, the plan would generate $47 billion over 10 years instead of the $87 billion officially projected as federal savings by the standard CBO methodology.
The most recent CBO analysis, requested by Sen. Judd Gregg (R-N.H.), uses an alternative method of calculating the cost of the Obama plan that takes into account the market risks – the prospect that student loan defaults over 10 years will exceed the default rate used in CBO's standard procedure for calculating the value of loans.
The new CBO calculation refueled student loan groups' and Republican lawmakers' opposition to the administration's plan. "CBO's conclusion that a downturn could cause a $33 billion swing in projected cost savings is reason enough for Congress not to rush consideration of the administration's proposal and to consider alternative reform proposals that pose less risks and costs to students and schools," Kevin Bruns, executive director of America's Student Loan Providers, told Inside Higher Ed.
House Democrats argued that the GOP was trying to "cook the books" by asking CBO to ignore current student loan market conditions. "It's clear that Republicans didn't like the truth – that our legislation generates almost $90 billion that could be used to help students, families, and taxpayers – so they shamelessly decided to have a little fun with the numbers," House Education Committee Chairman George Miller (D-CA) and sponsor of the House bill that includes Obama's proposal, said in a statement.
The most recent CBO analysis, requested by Sen. Judd Gregg (R-N.H.), uses an alternative method of calculating the cost of the Obama plan that takes into account the market risks – the prospect that student loan defaults over 10 years will exceed the default rate used in CBO's standard procedure for calculating the value of loans.
The new CBO calculation refueled student loan groups' and Republican lawmakers' opposition to the administration's plan. "CBO's conclusion that a downturn could cause a $33 billion swing in projected cost savings is reason enough for Congress not to rush consideration of the administration's proposal and to consider alternative reform proposals that pose less risks and costs to students and schools," Kevin Bruns, executive director of America's Student Loan Providers, told Inside Higher Ed.
House Democrats argued that the GOP was trying to "cook the books" by asking CBO to ignore current student loan market conditions. "It's clear that Republicans didn't like the truth – that our legislation generates almost $90 billion that could be used to help students, families, and taxpayers – so they shamelessly decided to have a little fun with the numbers," House Education Committee Chairman George Miller (D-CA) and sponsor of the House bill that includes Obama's proposal, said in a statement.
