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ERIC Number: ED540834
Record Type: Non-Journal
Publication Date: 2008-Oct
Pages: 14
Abstractor: ERIC
Reference Count: 0
Cost Estimates for Federal Student Loans: The Market Cost Debate
Delisle, Jason
New America Foundation
In an ongoing debate about the relative costs of the federal government's direct and guaranteed student loan programs, some budget experts and private lenders have argued for the use of "market cost" estimates. They assert that official government cost estimates for federal student loans differ from what private entities would likely charge taxpayers to deliver the benefits and services the program provides. A market cost estimate would take such information into account. Although the market cost concept for federal student loans has merit, the student loan industry has abused and distorted it. As part of an effort to discredit government estimates, which suggest that direct lending costs less than guaranteeing loans, the literature published by student loan companies generally calls for adopting market cost estimates only for direct loans or incorrectly applies the concept to guaranteed loans so that they appear to cost less than government estimates. Government agencies, including the Government Accountability Office, have added weight to these arguments by using flawed methodology. Market cost research that correctly applies the concept to both types of federal student loans suggests that the programs cost taxpayers much more than is reported in the federal budget. As such, it is important that policymakers, the media, and the public understand the market cost debate as it relates to the cost-effectiveness of guaranteed versus direct federal student loans. This issue brief aims to provide an explanation of the market cost concept and the public policy debate it has spurred. (Contains 2 figures, 2 tables, and 23 notes.)
New America Foundation. 1899 L Street NW Suite 400, Washington, DC 20036. Tel: 202-986-2700; Fax: 202-986-3696; Web site:
Publication Type: Reports - Descriptive
Education Level: Higher Education
Audience: N/A
Language: English
Sponsor: Institute for College Access & Success
Authoring Institution: New America Foundation