Jason Delisle of Higher Ed Watch notes that Senator Judd Gregg (R-NH) has taken a leading role in debunking one of the latest false claims coming from the student lending industry (the end of the post notes that Delisle used to work for Gregg):
By now it’s common knowledge in Washington that the proposal pending in Congress to move federal student loans to 100 percent direct lending generates savings by eliminating subsidies to private lenders under the alternative program, the Family Education Loan (FFEL) program. The student loan industry is now trying to draw attention away from those subsidies by arguing that it is actually student borrowers who will generate the savings when the government charges them interest on their direct loans.
Thanks to Senator Judd Gregg (R-NH) and the Congressional Budget Office, however, we know that this argument is merely a distraction in the form of a half truth.
Earlier this year, Senator Gregg requested that the Congressional Budget Office (CBO) calculate the savings from a 100 percent switch to direct loans using “market cost” estimates. The approach (which Higher Ed Watch supports) calculates government costs using the same methods and values that the private sector would apply. As such, it better captures the risks and costs loan programs pose to the government than does the approach required by law.
Using these methods, the CBO reported in July that the loan proposal would save $47 billion over 10 years, not $87 billion as stated in its official estimate. Many FFEL supporters championed this new estimate… but it seems that they did not fully understand the implications of what CBO reported.
Read the rest here; it’s an informative post.