ERIC Number: ED483242
Record Type: Non-Journal
Publication Date: 2004-Aug
Student Consolidation Loans: Further Analysis Could Lead to Enhanced Default Assumptions for Budgetary Cost Estimates. Report to the Chairman, Committee on the Budget, House of Representatives. GAO-04-843
Ashby, Cornelia M.
US Government Accountability Office
This study investigated: (1) differences between the Federal Family Education Loan Program (FFELP) and William D. Ford Federal Direct Loan Program (FDLP) consolidation loans and borrowers; (2) the extent to which borrowers with student loans under one program obtain consolidation loans under the other; and (3) how FFELP and FDLP borrower and loan characteristics and the movement of loans between the two programs are incorporated into the Department of Education's (Education's) budgetary cost estimates for consolidation loans. Researchers analyzed a representative sample of borrowers from Education's National Student Loan Data System who originated consolidation loans from 1995-June 2003. On average, FFELP consolidation loan borrowers had higher levels of consolidation loan debt than did FDLP consolidation loan borrowers, were more likely to have attended a four-year versus two-year or proprietary school, and were less likely to default on a student loan prior to consolidation. In both groups, those who had defaulted prior to consolidation were more likely to default on their consolidation loan than were those who did not default prior to consolidation. From 1998-2002, an increasing share of both FFELP and FDLP underlying loan volume was consolidated into FFELP, while a decreasing share was consolidated into FDLP. Defaulted loans overall were much more likely to be consolidated into FDLP. Education incorporates borrower and loan characteristics and movement of loans between programs into its budgetary cost estimates by grouping loans with similar characteristics into risk categories, forecasting loan volume for each risk category, and applying various assumptions to each risk category based on historical and other economic data. It incorporates borrower default history into its cost estimates by grouping consolidation loans with underlying defaulted loans in a risk category and applying higher default rate assumptions to loans in this category. Education has notes based on type of school attended. Comments from Education are appended.
Descriptors: Student Loan Programs, Loan Repayment, Federal Programs, Costs, Debt (Financial), Financial Aid Applicants
U.S. Government Accountability Office, 441 G Street NW, Room LM, Washington, DC 20548. Tel: 202-512-6000; TDD: 202-512-2537; Fax: 202-512-6061.
Publication Type: Numerical/Quantitative Data; Reports - Evaluative
Education Level: Higher Education
Authoring Institution: General Accounting Office, Washington, DC.