Submitted by fact checker (not verified) on April 4, 2008 - 7:34pm.
Indeed, Alex, the President's budget indicates that DL costs more than FFELP right now, but the President's budget also explains that this is entirely due to the fact that so many defaulted/defaulting FFELP loans are being dumped into DL by the guaranty agencies through consolidation. This is being done to recoup a greater percentage on the bad loans and make DL ostensibly more expensive in the bargain. If OMB costed the programs as CBO does, charging the defaulted loan to its original loan program, then OMB would agree with CBO that DL is less expensive for taxpayers. DL, without the bad FFELP loans mixed in, is ALWAYS cheaper. Cost of capital is lower and no special allowance payments. Voila.
helping Alex understand
Indeed, Alex, the President's budget indicates that DL costs more than FFELP right now, but the President's budget also explains that this is entirely due to the fact that so many defaulted/defaulting FFELP loans are being dumped into DL by the guaranty agencies through consolidation. This is being done to recoup a greater percentage on the bad loans and make DL ostensibly more expensive in the bargain. If OMB costed the programs as CBO does, charging the defaulted loan to its original loan program, then OMB would agree with CBO that DL is less expensive for taxpayers. DL, without the bad FFELP loans mixed in, is ALWAYS cheaper. Cost of capital is lower and no special allowance payments. Voila.