Credit Reform:

Speculative Savings Used to Offset Current Spending Increase Budget Uncertainty

AIMD-94-46: Published: Mar 18, 1994. Publicly Released: Mar 18, 1994.

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Pursuant to a congressional request, GAO reviewed the use of present value based credit savings to offset expenditures of a noncredit program, focusing on whether: (1) estimated savings from guaranteed student loans (GSL) can be used to offset unemployment benefits; and (2) GSL program savings estimates are speculative.

GAO found that: (1) although using the present value estimated savings from the GSL program to offset unemployment benefit expenditures is consistent with credit reform requirements, using the estimated savings to offset current spending could result in unrealistic savings estimates; (2) the net present value of estimated future collections from guaranteed student loans are speculative because the Department of Education does not have sufficient historical data to base estimates for one of the collection methods; and (3) maintaining revenue data by collection method would permit more accurate future estimates and facilitate review and oversight.

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