Direct Loan Debate

HRD-93-15R: Published: Feb 8, 1993. Publicly Released: Feb 8, 1993.

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GAO responded to claims that it understated or excluded costs that biased a report favoring the conversion of the Federal Family Education Loan Program to a direct loan program. GAO believes that: (1) its report provided a sound and balanced assessment of the savings which could be realized under a direct loan program; (2) future guaranty agency insolvencies are not relevant to the direct loan debate, since any costs from insolvencies under the existing program would not be assigned to a successor program; (3) any increase in the federal cost of borrowing is likely to be negligible; (4) the interest rate margin between the rate charged to borrowers and the federal cost of borrowing was a significant source of savings; (5) the federal government could use risk management strategies to minimize interest rate risk; and (6) its reporting of the results of its focus group discussions was fair and balanced.

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