ERIC Number: ED355849
Record Type: Non-Journal
Publication Date: 1993-Feb-22
Reference Count: N/A
Federal Family Education Loans: Reduced Costs, Direct Lending, and National Income.
Miles, Barbara; Zimmerman, Dennis
This congressional report argues that the costs of the current guaranteed lending program for postsecondary education can be reduced in three ways: (1) by eliminating more-than-competitive returns to private lenders; (2) by reducing administrative costs; and (3) by reducing default costs. It is suggested that the first solution can be accomplished with or without direct lending but that administrative costs are more likely to be increased than decreased by direct lending. The third solution--reducing default costs--is advanced by explicit understanding that subsidies intended to produce benefits to society cannot be repaid by students who fail to receive gains from the investment commensurate with its cost. Cost reductions in such cases cannot be accomplished either by direct or guaranteed private lending, thus bringing about certain loan restrictions and a separate subsidy structure such as grants or income contingent repayment plans. The report argues that if the current program were providing competitive returns to lenders, national income would not be increased by conversion to a direct lending program; budget "savings" would amount to no more than the failure of federal bookkeeping to record outlays for taxpayers' absorption of risk, and any increased funding available for public spending would be exactly offset by reduced private sector income. (GLR)
Publication Type: Reports - Research; Information Analyses
Education Level: N/A
Authoring Institution: Library of Congress, Washington, DC. Congressional Research Service.
Identifiers - Laws, Policies, & Programs: Family Education Loan Program