New ED Figures Project FFELP Loans Less Expensive Than Direct Loans

A comparison of new budget and loan-volume projections from the U.S. Department of Education indicates that Federal Family Education Loan Program loans will cost the federal government two-and-a-half times less than direct loans. The dramatic turnaround in the relative federal costs of the two student-loan programs is due to the College Cost Reduction and Access Act, which cuts more than $20 billion from the FFELP during the next five years, but increases the federal costs of the direct-loan program, through loan forgiveness and other provisions.

As first reported in the online newsletter “Inside Higher Education”, comparing revised budget projections with updated loan-volume projections, every $100 of FFELP loans issued during fiscal 2008 would cost the federal government $1.72, while every $100 of direct loans would cost $4.26.

Official subsidy costs for the two loan programs will be issued in February when the Bush administration submits its 2009 budget to the U.S. Congress.

The Education Department’s loan-volume figures project that the share of total Stafford- and PLUS-loan volume provided by the direct-loan program will continue to decline in fiscal 2008 to less than 20 percent.