How Much Will Student-Loan Changes Really Save?
So remember that nearly $90 billion worth of savings projected by those "bombshell" student loan changes in the bill approved last week by the House Education and Labor Committee? The savings that were supposed to pay for a $10 billion new investment in early-childhood education, a big boost for Pell Grants for college students, not to mention $10 billion in new money for community colleges?
Well, that much money may not be available, according to a recent Congressional Budget Office analysis, requested by Sen. Judd Gregg (PDF), a Republican from New Hampshire and noted deficit hawk. He asked the CBO to do another estimate, taking into account "market risk," and that changed things considerably.
The Gregg-requested estimate projects about $47 billion in savings, leaving less money for new education investments.
So who is right? Congressional Democratic leaders, with their original analysis of nearly $90 billion, or the new analysis, requested by Gregg? Interestingly, the new analysis is closer to the administration's original estimate, put out by the Office of Management and Budget, of about $40 billion. (We wrote about that estimate in this story.)
Rep. John Kline of Minnesota, the top Republican on the House Education panel, already has a statement out on the estimate Gregg requested.
“Democrats herald an alleged $87 billion in savings and government earnings as evidence that billions in new government borrowing is sound fiscal policy. This analysis from the Congressional Budget Office confirms once and for all that these savings are a myth. A government takeover of our student loan programs is just a budgetary gimmick designed to finance the latest entitlement spending spree, leaving our children and grandchildren to pick up the tab.”
If Gregg is able to persuade his Senate colleagues that the calculations he asked for are closer to reality, will that chamber still include the early-childhood and community college proposals in its yet-to-be-introduced version of the student-loan legislation?
Should make for an interesting debate, with a lot of money for education at stake.
UPDATE: The back-and-forth has begun: Rep. George Miller, D-Calif., the chairman of the House Education and Labor Committee, just released a statement saying that the Gregg-requested analysis isn't accurate and doesn't change the official estimate of the House legislation.
“It’s clear that Republicans didn’t like the truth – that our legislation generates almost $90 billion that could be used to help students, families, and taxpayers – so they shamelessly decided to have a little fun with the numbers,” Miller said in the statement.
UPDATE 2: The U.S. Department of Education also has a response to the CBO analysis Gregg requested. They describe why they prefer the CBO's original estimate of $87 billion in savings, saying the methodology used in that analysis "is required by federal statute and provides a longstanding, neutral, and objective basis for comparing the costs to Government of federal loan and loan guarantee programs, and to other forms of federal spending."
The Department adds that the 'market cost' analysis "provides a useful perspective—and confirms that the administration’s approach saves tens of billions of dollars—the cost estimate using the official methodology is a more accurate depiction of the policy’s impact on federal deficits and debt."