Guaranty Agencies

New Report on Federal Student Loan Guaranty Agencies

Ed Policy — Tue, 14 Jul 2009 14:29:00 -0400

In February, President Obama proposed eliminating the Federal Family Education Loan (FFEL) Program and shifting all new federal student loans to the Direct Loan Program. Both programs provide the same loans to student borrowers (i.e. Stafford loans), although they are administered in different ways. While media coverage has focused on the lenders that operate the FFEL Program, federal student loan guaranty agencies have been largely ignored. Guaranty agencies are private non-profit or state government entities that administer federal insurance and collect on defaulted student loans. Yet any significant changes to the FFEL Program will affect these little-understood entities.

To help inform the debate on federal student loan reform, the New America Foundation's Education Policy Program today released "Rethinking the Middleman," a policy paper that provides an overview of the history and current responsibilities of guaranty agencies, a critical analysis of the federal payments these entities receive, and recommendations for reforms.

The paper includes the following:

The history of guaranty agencies and how their roles have changed and evolved over time;
How federal payments to guaranty agencies work at cross purposes and can undermine policy goals;
The negative consequences of affiliations between guaranty agencies and student loan companies for borrowers and FFEL Program integrity; and
Options for policymakers to reform these agencies.

The full report is available here.

Getting to Know Guaranty Agencies: Federal Subsidies and Payments

Ben Miller — Thu, 02 Jul 2009 14:46:00 -0400

[In recent months we have cast a critical eye on federal student loan guaranty agencies by taking a closer look at a few specific agencies to show how concerns about conflicts of interests and misaligned financial incentives operate in practice. Previous entries can be found here, here, here, here, and here. Today, our series continues with a look at the actual amount of subsidies and payments provided to these agencies.]

Guaranty agencies are paid to perform three basic functions within the Federal Family Education Loan (FFEL) Program: provide default insurance for lenders; work with delinquent borrowers to help them avoid default; and collect on or rehabilitate defaulted student loans. Though each individual purpose is important; entrusting a single agency to carry out all of these functions creates opportunities for conflicts of interest. Even worse, the financial payment structure provides guaranty agencies with the greatest compensation for letting a student loan default -- the worst possible outcome for borrowers and taxpayers.

According to the U.S. Department of Education, guaranty agencies received $1.57 billion from the federal government in fiscal year 2008 for dealing with defaulted student loans and working with borrowers. Guaranty agencies also ended the 2008 fiscal year with an additional $1.63 billion worth of federal assets held in trust to reimburse lenders for losses on defaulted loans.

A breakdown of the distribution of federal payments to guaranty agencies reveals why taxpayers and policymakers should be concerned about these companies' financial incentives. As the table below shows, 60.5 percent, or $948.8 million, of the federal payments guaranty agencies received in the 2008 fiscal year were for the collection and rehabilitation of defaulted student loans. (The Department of Education does not separate these payments out so we don't know how much agencies got for each function.) By contrast, they received only $177.3 million for helping keep borrowers out of default. In addition, guaranty agencies received $203.9 million to cover the cost of processing and issuing the initial default guarantee on new loans and another $237.9 million for maintaining existing loan accounts.

For some guaranty agencies, collection revenue represents an even greater share of its federal payments. At six of the 35 agencies, collection income represented more than 70 percent of federal payments. Collection payments, for example, comprised over 82 percent of federal income at the Florida guaranty agency, 79 percent at the Educational Credit Management Corporation, and 73 percent at the Connecticut Student Loan Foundation. At the other extreme, the North Carolina guaranty agency received just 20 percent of its federal payments from collecting on defaulted loans.

Guarantors are rewarded for keeping borrowers out of default, but the payments they receive for doing so are much smaller than those they obtain for collecting on and rehabilitating defaulted loans.

When borrowers fall behind on their payments, lenders are obligated to request default aversion assistance from the guaranty agencies in charge of the default insurance on the loans. These agencies then work with borrowers to keep them in repayment. In exchange, the guaranty agency receives an amount equal to 1 percent of the loan's outstanding balance. If the loan defaults, the agency must return 1 percent of the loan's balance at the time of default.

By contrast, when a guaranty agency rehabilitates a defaulted student loan, it receives 18.5 percent of the loan's value at the time of default, plus any interest that has accrued since then (usually around 1.5 percent).[i] In addition, it keeps another 18.5 percent of the loan in the form of collection costs that have been added to the borrower's balance owed. Rehabilitating a loan thus yields the guaranty agency as much as 38.5 percent of the loan's balance.

Similarly, payments for default aversion pale in comparison to those for collection efforts. A guaranty agency receives 16 percent of any amount it collects. In addition, there is no strict cap on collection costs, meaning it could charge borrowers as much as 25 percent for trying to recover missed payments. With payments this high, a guaranty agency has to collect only a small amount of a loan's balance in order to earn more through this activity than what it gets for default prevention.

The significant discrepancy between payments for rehabilitation/collection and default aversion means that the most profitable action for guaranty agencies -- letting a loan default -- is the worst possible outcome for borrowers, taxpayers, and even lenders. The guaranty agency may receive a hefty payday from this action, but the federal government is on the hook for at least 97 percent of the loan's value, while student loan companies suffer the other 3 percent loss. Meanwhile, defaulted borrowers are left with a tarnished credit record, and face wage garnishment, and other types of aggressive collection activities.

Many guaranty agencies portray themselves as advocates for borrowers, working with individuals as they struggle to manage their loans. While we don't doubt that some agencies are sincere in these efforts, the financial figures and compensation structure clearly show why those guarantors are few and far between.

[i] In the past, loan rehabilitation required the guaranty agency to get borrowers to make nine out of 10 payments on a revised payment plan. Once that occurred, the loan was rehabilitated when the guaranty agency sold the loan to an eligible lender. Due to disruptions in the credit markets, however, guaranty agencies were unable to find willing purchasers of rehabilitated loans. As a result, Congress recently granted the Secretary of Education the authority to rehabilitate loans by purchasing them from a guaranty agency. In this situation, the guaranty agency's only compensation is the 18.5 percent of the loan's balance that it charges the borrower for collection costs.

Making Rehabilitation a True Borrower Benefit

Ben Miller — Tue, 21 Apr 2009 14:38:00 -0400

A few weeks ago, we wrote about how the financial crisis had gummed up the federal student loan rehabilitation process, leaving thousands of borrowers stuck in default. We are pleased that the U.S. House of Representatives recently tackled this issue as part of its technical amendments to the Higher Education Act reauthorization legislation Congress passed last year, and especially heartened that it did not turn the rehabilitation fix into a boon for guaranty agencies. But as we wait for the Senate to consider its own version of the legislation, lawmakers need to ensure that the final bill includes important changes the House made that would finally turn the rehabilitation process into a true benefit for borrowers.

Loan rehabilitation is designed as a one-time way for borrowers who have defaulted on their federal student loans to return their debt to regular repayment status. Successful rehabilitation requires borrowers to work with their guaranty agency -- the entity that takes control of the loan once a lender files a default claim -- to establish a new payment plan. Borrowers are then expected to make nine out of 10 monthly payments, after which their loan can be considered rehabilitated if it is sold to an eligible lender.

Creating a pathway for borrowers with defaulted loans to return to good standing provides numerous benefits for those individuals. The borrower, for example, is once again eligible for federal student aid and can take advantage of flexible student loan payment plans, such as income-based or income-contingent repayment. Even more important, the default is expunged from a borrower's credit record, making it easier for that person to obtain other consumer loans, such as those for a house or car.

But the rehabilitation process, as currently constructed, has a couple of major flaws. First, as we previously reported, poor credit markets are making it impossible for guaranty agencies to complete the rehabilitation process by selling loans to lenders.[1]

Second, it turns out that rehabilitation does not entirely wipe a borrower's credit history clean. As currently outlined in regulation, a guaranty agency has an obligation to remove only the record of default from a borrower's credit history. The string of late or missed payments and period of delinquency that got a borrower into dire straits in the first place is not expunged.

Likewise, the original loan holder doesn't have any obligation to clear the adverse history. As part of its servicing responsibilities, a lender is required to inform a consumer reporting bureau every 90 days (or quarterly) about the status of a borrower's loan, including the amounts owed on it, and whether the loan is delinquent. But once the loan defaults, the lender hands over the title of it to the guaranty agency -- meaning it no longer has responsibility to report the loan's return to repayment status, even if it is successfully rehabilitated.

In other words, the benefits of rehabilitation are not as generous as advertised. Borrowers don't entirely get the fresh start that has been promised.

In the legislation it recently approved, the U.S. House of Representatives took on both of these issues. The bill addresses the loan buying problem by temporarily giving guaranty agencies the authority to assign rehabilitation-ready loans to the Secretary of Education if they can't find any lenders willing to purchase them

We were especially pleased to see that the House bill would fix the rehabilitation purchase process without providing a windfall to guaranty agencies. When we first discussed this issue, we were concerned that Congress would allow guaranty agencies to assign rehabilitation-ready loans to the Secretary of Education and still receive the fees they are legislatively promised for a loan sale (18.5 percent of the principal owed at the time of default plus another 18.5 percent charged to the borrower for collection costs). This is problematic because the non-collection cost compensation is designed as a reward for successfully locating a willing buyer, something a guaranty agency would not have to worry about if it assigns a loan to the Secretary. The bill addresses this issue by limiting guaranty agency compensation to the amount they would have received in collection costs had the loan been sold as part of a normal rehabilitation process.

The bill also prohibits consumer reporting agencies from including any adverse information on loans that are rehabilitated either through assignment or sale. Under this change, borrowers would have both their history of delinquency and default erased from their credit report, thus ensuring that rehabilitation actually provides borrowers with a clean record.

As the Senate is likely to take up the technical amendments bill soon, it is important that lawmakers preserve both of these important changes with regards to rehabilitation. If they don't, what is supposed to be a one-time fresh start for borrowers will be little more than an empty promise.

[1] We should note that guaranty agencies had agreed to stop deducting default charges from borrowers' state tax refunds if they have met the rehabilitation payment criterion but whose loans haven't been sold. This process was already occurring with federal loans. This change did provide some modicum of relief, though it did not provide the other positive benefits of rehabilitation.

Getting to Know Guaranty Agencies: The Northwest Education Loan Association

Ben Miller — Wed, 08 Apr 2009 15:38:00 -0400

Higher Ed Watch continues its series that takes a closer look at individual federal student loan guaranty agencies. The introductory post can be found here. The first post, on the Georgia Student Finance Commission can be found here. Today, the series continues with the Northwest Education Loan Agency.

The Northwest Education Loan Association (NELA) is a nonprofit guaranty agency based in Seattle, Washington that serves as the designated guaranty agency for both Washington and Idaho.

In operation since 1978, NELA was the 13th largest guarantor (out of 35) in the 2008 federal fiscal year, overseeing 176,773 loans worth $799.1 million. It was, however, the smallest guaranty agency to act as a designated guarantor for multiple states.

Unlike the Georgia Student Finance Commission (GSFC), which is basically a state agency, NELA is a private, nonprofit guarantor. It is, however, anything but independent. In late 2004, Sallie Mae, the country's largest student loan provider, essentially took over the guaranty agency's operations. This arrangement raises serious conflict of interest concerns, calling into question how a guarantor can carry out its federal oversight responsibilities over a lender that effectively controls it. As we have seen in similar cases, these types of close-knit relationships between lenders and guarantors can leave borrowers vulnerable to abuse.

Ties to Lenders

Student loan borrowers in Washington and Idaho may be forgiven if they are confused about NELA's relationship with Sallie Mae. On its website, NELA goes out of its way to stress that it is "not a subsidiary" of Sallie Mae. That is certainly true on its face. Federal law prohibits for-profit companies like Sallie Mae from owning nonprofit entities such as guaranty agencies. That restriction makes sense because the Higher Education Act puts guarantors in charge of overseeing loan providers -- making sure, for instance, that lenders do everything required to keep borrowers who are delinquent on their loans from defaulting.

But Sallie Mae found a clever way around that restriction. In December 2004 the lending giant acquired the Student Loan Finance Association (SLFA), a secondary market in the state of Washington, and its parent company, the Education Assistance Foundation. NELA had already outsourced all of its activities to SLFA's servicing arm. In this capacity, NELA maintained no employees, according to a 1999 report from the Financial Accounting Standards Board.

Sallie Mae's purchase of SLFA led to several changes in the way NELA was governed. First, it renamed SLFA's servicing arm NELA Services, though it maintained the outsourcing relationship that already existed. As part of this deal, the loan giant began marketing NELA's services as a guaranty agency (page 14). In fiscal year 2006, NELA paid Sallie Mae $30.5 million to handle guarantor services. It also paid $1.7 million to Sallie Mae's Student Assistance Corporation for default aversion assistance. NELA Services, meanwhile, outsourced its Seattle call center to Sallie Mae. By February of 2005, 74 of the 143 transferred employees at this counseling and default prevention center had been laid off.

In addition, NELA entered into an affiliate agreement with USA Funds (USAF), the nation's largest guarantor, which Sallie Mae also effectively oversees. While NELA maintained a separate legal identity, this arrangement basically made it a subsidiary of USAF. Today, five out of the seven members (page 5) of NELA's board are USAF executives, including its president and chief executive officer, vice president for customer relations, and general counsel. A sixth member, the president of the University of Portland, serves on both the NELA and USAF boards. NELA's financial statements are also filed by the same individual from the same address as USAF in Indianapolis. In 2006, NELA paid USAF over $240,000 for administrative fees.

NELA's relationship to Sallie Mae mimics the one that exists between the loan giant and USAF. In 2000, Sallie Mae purchased USAF's parent company, USA Group. While the loan company's purchase didn't include USA Funds, it did gain control of USA Group Guarantee Services, a for-profit subsidiary that provided administrative services to help the guarantor carry out its functions. In addition, USAF agreed to pay Sallie Mae $250 million annually to manage its guaranty agency's functions.

The Department of Education's Inspector General (IG) raised objections to this arrangement in 2002, arguing that it created a conflict of interest that could harm borrowers. With Sallie Mae effectively controlling the guarantor, the IG wrote, there was no independent agency ensuring that the loan giant was doing all it could to ensure borrowers didn't fall behind on their payments. In fact, the IG warned that by working hand-in-hand, the two entities actually had a perverse incentive to let borrowers fall behind so that USA Funds could collect the generous subsidies the government provided guarantors for keeping delinquent borrowers out of default.

The IG's warnings appear to have proved prescient. A former Sallie Mae employee has filed a false claims suit accusing the loan company of exploiting its ties with USA Funds "to systematically balloon student loan debts." According to the lawsuit, Sallie Mae employees working for USA Funds routinely placed delinquent borrowers into forbearance without getting their consent. Doing so allows borrowers to temporarily stop making payments on their loans, but interest continues to accrue, increasing the size of the borrowers' total debt load -- as well as the amount the guarantor can collect if the loans ultimately go into default.

While we have not heard specific complaints about NELA, it's clear that the similarity of its arrangement with Sallie Mae presents the same opportunities to undermine its ability to carry out a core function of guarantors -- providing independent and impartial oversight over the lenders with which it works -- that has allegedly occurred with USAF.

Non-Federal Activities

The ties between NELA, USAF, and Sallie Mae should raise the question as to why these companies have gone to such great lengths to keep the NELA name. One answer may be to build goodwill at the local level. As a diagram of the three agencies' connections outlines, some of NELA's strengths in the complex triangle are "familiar faces," being "regionally focused," and "extensive outreach efforts on campuses and the community." In other words, NELA provides a local face for a company that may otherwise be seen as a national behemoth.

NELA accomplishes its local goodwill through several activities, some of which are at least partially financed by USAF. For example, NELA sponsors the Take Aim Scholarship Program, which provides aid to students at community colleges in Oregon and Washington. USAF provided $231,000 for this initiative in the 2006 fiscal year, according to its tax filing.

In addition, NELA also operates Centers for Student Success in both Oregon and Washington. These facilities help provide information to the public about paying and planning for college. They also generate positive press such as this article.

On top of funding from USAF, NELA also partially pays for these initiatives through excess guaranty agency fees paid by the federal government. On its website, NELA notes that it has expanded its role beyond guaranteeing student loans "because technology has advanced and the guarantee process has become more automated, NELA has more resources available to promote access to higher education." While college access is an important goal, NELA presents no evidence documenting the effectiveness of the way it uses its excess government subsidies. Moreover, despite redirecting some of its excess subsidies to college completion activities, NELA still reported net income of $1.3 million in fiscal year 2006.

Performance Indicators

One area in which NELA is struggling is in preventing student loan defaults. In 2006 it had a cohort default rate of 8.9 percent, the seventh highest among the 36 agencies listed. This is substantially worse than the previous two years in which it had default rates of 7.1 and 7.2 percent, respectively. By contrast, the 2002 cohort -- the last round of data published before the Sallie Mae purchase of SLFA -- had a default rate of 5.2 percent. In other words, the cohort default rate for NELA has increased substantially since Sallie Mae and USAF took over its operations. This change is not attributable to the overall increase in cohort default rates, which has been much smaller.

Given that NELA contracts out its default aversion activities, the growth in its cohort default rate should certainly raise questions whether the Sallie Mae affiliate it has selected to handle these responsibilities was the best option.

Conclusion

Our first entry on the Georgia guaranty agency touched on how a state entity connected to both a lender and grant maker could distort its image, fail to properly carry out its oversight role, and gain political influence. But as NELA shows, a guaranty agency does not have to also serve as a lender to raise questions about independence and proper oversight. There is strong evidence that NELA's heavily intertwined relationships with Sallie Mae and USAF put it in a position that make it virtually impossible to carry out the oversight role expected of it by Congress and the U.S. Department of Education. Moreover, the growth in the agency's default rate since it outsourced default aversion activities to Sallie Mae and USAF raises significant questions about whether NELA is doing its best to serve students.

Check back soon for the next edition of Higher Ed Watch's Getting to Know Guaranty Agency series.

Editor's Note: The author attempted to contact NELA but the agency did not respond.

Higher Ed Roundup: Week of March 16 - March 20

Ed Policy — Thu, 19 Mar 2009 18:08:00 -0400

More Students Attending Community Colleges...

...As A Survey Discusses How to Keep Them Enrolled

Turmoil in Connecticut over Nonprofit Lender/Guaranty Agency

Briefly Noted...

More Students Attending Community Colleges...

Community college enrollment is up by every measure, according to a recent survey of 120 community college leaders. Conducted by the Campus Computing Project and the League for Innovation in the Community College, the survey found that 71 percent of respondents reported at least a 5 percent increase in head count enrollment over the past year. Around 60 percent of schools also reported that they saw at least a 5 percent increase in full-time students, while 56 percent of schools reported at least a 5 percent increase in part-time enrollment. These enrollment increases have not, however, been met with similar funding boosts. The survey found that 57 percent of respondents saw their funding decrease for this year.

...As A Survey Discusses How to Keep Them Enrolled

While more students are attending community colleges, these enrollment gains will be for naught if institutions do not do a better job retaining their students. The Survey of Entering Student Engagement, released recently by the Center for Community College Student Engagement (CCCSE) found that 14 percent of entering community college students never earn a college credit in their first term, and just 15 percent of those students re-enroll in the next term. The report suggests six principles community colleges should employ to encourage more entering students to attain credits in their first term and stay enrolled for subsequent terms: (1) Create personal connections; (2) Encourage high expectations and aspirations; (3) Develop plans and pathways for success; (4) Create a clear track to become college-ready academically; (5) Engage students in active learning; and (6) Provide an integrated network of academic, financial aid, and social support.

Turmoil in Connecticut over Nonprofit Lender/Guaranty Agency

Reports of inappropriate spending at the troubled Connecticut Student Loan Foundation (CSLF) led the state's governor to make substantial changes at the nonprofit student loan company/guaranty agency. Gov. M. Jodi Rell announced last week that she would be replacing all six of her appointees to the agency's 14 member board (the other eight are appointed by the state legislature and other education agencies) effective immediately. Rell's decision came shortly after reports emerged about a recent audit of the agency that showed it engaged in "disgraceful" spending on salary compensation and perks such as sports tickets and fancy meals. The spending practices uncovered by the audit were especially shocking because the agency had lost a total of $35.5 million over the last five years. The agency's future is unclear, though the General Assembly is considering a bill that would end CSLF's ability to both guarantee and originate student loans. Such action may not be necessary, however, if CSLF is eliminated with all other guaranty agencies as part of President Obama's plan to end the Federal Family Education Loan Program.

Briefly Noted...

House of Representatives passes bill to reauthorize and expand national service programs.
Nelnet announces that it will not participate in the PLUS loan auction.
Department of Education releases its annual digest of information on spending, enrollment, revenue, and several other factors related to all levels of education.

Laying Out Student Loan Options for CBO

Jason Delisle — Thu, 30 Oct 2008 15:52:00 -0400

Around this time of year our friends at the Congressional Budget Office (CBO) begin work on an important but overlooked document: the Budget Options report. As most readers know, the Congressional Budget Office provides official cost estimates for legislation considered by Congress. While these estimates play a key role in congressional deliberations, CBO doesn't provide them for just any policy proposal. Only bills formally considered by congressional committees are guaranteed an estimate. Requests by members of Congress for other estimates wait their turn in a long line. And CBO doesn't do estimates requested by anyone other than a member of Congress.

The Budget Options report, however, is the one exception to this process. Usually published in February of odd numbered years, the report contains CBO sanctioned cost estimates for all sorts of policy proposals, including a handful on higher education. Higher Ed Watch has learned that CBO is open to suggestions on which proposals it includes in the report, and so we've come up with a few for 2009. Although CBO does not take any position on the policies in the report, the cost or savings information it provides will help inform the public debate on these important higher education issues.

Recommendations for CBO's 2009 Budget Options Report

Reform Guaranty Agency Role, Change Subsidies to Competitive Grants

As we have said previously, the role student loan guaranty agencies play in the Federal Family Education Loan (FFEL) program is anachronistic, inefficient, ill-defined and riddled with conflicts of interest that harm taxpayers and students. Their primary function is to serve as middlemen, using federal funds to reimburse lenders for loan defaults. Guaranty agencies are also supposed to oversee lenders, but this role is often compromised because of their close ties with loan companies. Even guaranty agencies' most useful activities, loan default prevention and rehabilitation, are weakened by conflicting federal incentives and ties to lenders. [See, for instance, this report from The Chronicle of Higher Education.]

If guaranty agencies are to play any role at all in the federal student loan programs, we at Higher Ed Watch believe that it should be refocused to one of preventing student loan defaults. Regardless, the Department of Education should take the lead role in guaranteeing loans and overseeing lenders' activities.

We would like to see the CBO Budget Options report estimate the costs and savings of this new slimmed-down role for guarantors. As part of this calculation, CBO should include the savings from eliminating the existing set of arbitrary and conflicting fees paid to guaranty agencies, and the return of federal assets they currently hold. The estimate should also include the costs of a new compensation arrangement for guaranty agency default prevention work that uses competitive grants from the federal government.

Extend The Subsidized Stafford Loan Interest Rate

The College Cost Reduction and Access Act of 2007 enacted a campaign promise made by Democratic Congressional candidates in 2006 to "cut student loan interest rates in half." In pushing this legislation through Congress, Democratic leaders barely fulfilled the promise, adding a number of caveats (which we criticized here) that limited the benefit considerably. In fact, only one cohort of federally subsidized loans -- those issued in academic year 2011-2012 -- will carry a fixed interest rate of 3.4 percent. After that, the rate cut expires and students will go back to paying a 6.8 percent fixed rate. The authors of the legislation included this provision because extending the rate cut to additional years was too expensive. (Lower interest rates require higher subsidies to both students and FFEL lenders making the loans).

There will inevitably be political pressure to extend the rate cut for new loans beyond 2011-2012. For that reason, we would like to see CBO include an estimate in the Budget Options book showing just how expensive it would be for Congress to extend the interest rate cut for an additional five years or make it permanent.

Expand Student Loan Interest Rate Reduction

Instead of subsidizing lower interest rates on federal student loans, Congress might consider better targeting assistance to college graduates with burdensome levels of debt by expanding the student loan interest deduction.

Under current law, lower and middle income borrowers can deduct $2,500 in student loan interest payments each year, which is the annual interest on about $36,800 in student loan debt. The deduction effectively lowers the borrower's interest rate by his or her marginal tax rate, acting like an interest rate cut. But unlike the rate cut Congress passed last year, the deduction is better targeted because it is not available to higher-income individuals (the cut-off is $65,000 in gross income for an individual). College graduates receive a lower interest rate when they are just starting out, but lose the benefit once they land an upper management or CEO gig.

We would like to see CBO include in its Budget Options report an estimate of the costs of making the student loan interest deduction more generous. For example, the agency should estimate the costs of converting the deduction to a tax credit worth up to 50 percent of $2,500 in student loan interest. Such a policy has the effect of "cutting student loan interest rates in half" but only for borrowers earning less than $65,000. This option is fairer for borrowers and taxpayers than the rate cut enacted last year.

Watch for the Budget Options 2009

The CBO Budget Options report deserves more attention among those interested in federal higher education programs. The estimates it provides help make for a more informed debate on key higher education policy proposals. The 2009 report will be especially crucial, considering all of the difficult student loan issues the next President and Congress will have to confront.

Ben Miller contributed to this post.