Sorry, I should have caught this earlier. In the report that the Congressional Budget Office put out last Friday, they provided a new estimate for budget savings from the elimination of FFELP. Earlier estimates put out by the Obama Administration were $4 billion in savings/year and the new figures put out by CBO are.... $94 billion over a 10-year period.
Here is the explanation provided in the CBO report:
Student Loans. The President’s proposal would essentially eliminate the federal guaranteed student loan program, replacing such loans with direct loans made by the Department of Education. Under the Federal Credit Reform Act, the budgetary cost of direct loans and guaranteed loans reflects the total cash flows over the life of each loan. Under current law, the direct loan program is estimated to have a lower cost for each dollar loaned than does the guaranteed loan program. Thus, assuming that loan volume does not change, replacing the guaranteed loan program with additional direct loans would yield budgetary savings. CBO estimates that savings would total $94 billion over the 2010–2019 period.
Yet the politics of this continue to get interesting. Today, Politico is reporting that several Democrats (Sen. Conrad of North Dakota and Rep. Obey from Wisconsin) are taking issue with the Obama plan:
"Lobbyists tracking the debate said Conrad and Obey’s objections center
largely on Obama’s proposal to take the popular Pell Grant program out
of the annual appropriations process – with all the political
horse-trading that implies — and instead guarantee that the program
will be paid for based on a set formula."
Senator Conrad also released a statement, according to Politico, that "his budget plan would create a
reserve fund to allow for increases in Pell grants in line with those
proposed in Obama’s budget. However, he nixed the idea of a new
entitlement and made no reference to the so-called 100 percent
direct-lending proposal."
Comments