Student Loans:

Direct Loans Could Save Billions in First 5 Years With Proper Implementation

HRD-93-27: Published: Nov 25, 1992. Publicly Released: Nov 25, 1992.

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Pursuant to a congressional request, GAO reviewed potential savings to the government by using direct rather than guaranteed loans to provide assistance to postsecondary school students, focusing on: (1) how direct loans achieve cost savings; and (2) the impact of direct lending on financial institutions.

GAO found that: (1) direct student loans could save the federal government about $4.8 billion for loans made in fiscal years 1994 through 1998; (2) the government could use interest earnings from direct student loans to curtail program costs; (3) lower program costs would lessen start-up and administrative costs, but not offset federal cost savings; (4) savings derived from Stafford loans could total $3.2 billion; and (5) there were concerns about whether the Department of Education could efficiently administer the program nationally.

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