ERIC Number: ED347942
Record Type: Non-Journal
Publication Date: 1992-Jul
Reference Count: N/A
Guaranteed Student Loans: Eliminating Interest Rate Floors Could Generate Substantial Savings. Report to the Honorable George D. Mitchell, U.S. Senate.
General Accounting Office, Washington, DC. Div. of Human Resources.
A study was done of how interest rate floors on certain guaranteed student loans affect the federal government's and students' costs when rates on short-term government securities decline. The study developed cost comparisons using fixed and variable loan interest rates. For comparison Department of Education projections of loan volumes for fiscal year 1992-97 were used. The results indicated that establishing a variable interest rate structure for guaranteed student loans, while retaining the current caps, could save the federal government and student borrowers several hundred million dollars in future interest payments. Recent declines in the Treasury bill yields have caused interest rates to fall on certain kinds of loans under the Stafford Student Loan Program but not on others. Of the loans in the Stafford Student Loan Program, Stafford and consolidation loans have interest rate floors that prevent borrowers and the government from benefiting when Treasury Bill yields drop. If the loan programs that now have interest rate floors were to have variable interest rates, the federal government and student borrowers could pay in fiscal year 1992 about $100 million and $143 million less in interest payments respectively. Included are two figures and two appendixes (JB)
Descriptors: Educational Finance, Federal Government, Higher Education, Program Administration, Student Loan Programs
U.S. General Accounting Office, P.O. Box 6015, Gaithersburg, MD 20877 (first copy free; additional copies $2 each).
Publication Type: Reports - Evaluative
Education Level: N/A
Authoring Institution: General Accounting Office, Washington, DC. Div. of Human Resources.
Identifiers - Laws, Policies, & Programs: Stafford Student Loan Program