Federal Government Credit Activities and How They Relate to Loan Sales

GAO discussed the federal government's plan to privatize its credit programs through the sale of its loan assets to generate budgetary receipts. GAO found that: (1) the proposed sale would not reduce the budget deficit, because it would simply shift revenues from future years to the year of sale; (2) the federal government would benefit more from future loan repayments than from the estimated proceeds of the sale of loan assets; and (3) measurement of federal loan subsidy costs through loan sales would not indicate the true cost the government incurred in making the loans. GAO believes that: (1) there is a need for proper documentation on borrowers, improved agency accounting systems, and updated records on loan delinquency and defaults; and (2) independent audits of loan sales would ensure objective evaluations of the sale results and improve accountability of future loan sales.