Romney’s campaign points to figures that the Department of Education borrowed billions more from the Treasury than expected to meet student loan demand, and that those loans are performing worse than expected.
But experts such as Mark Kantrowitz, creator of the website finaid.org and a leading student aid expert, and others say looking at a given year’s cash flow the way Romney’s campaign does isn’t how you tell whether any lender — whether a bank or the government — will eventually make or lose money on the loans it’s making.
In fact, it’s impossible to know whether taxpayers will make or lose money over time on the student loans Washington’s now disbursing; that will depend on unpredictable variables like future interest rates, and how many borrowers default or choose the income-based repayment option.
Still, there are accounting methods to estimate the present value of the payments the government will collect on those loans over the coming years. The method the Congressional Budget Office is required by law to use values the $113 billion in direct loans Washington will disburse to students this year at $150 billion — in other words, an asset worth $37 billion to taxpayers, not a liability. A different valuation method favored by some in Congress and many economists shows direct lending as less profitable, but still in the black and far more profitable than subsidized lending.
True, like any lender, the federal government could be ‘‘on the hook’’ for big losses if current projections are off and defaults jump. But that would also be true in the old system of government-guaranteed loans. Under current projections, direct lending will make money for taxpayers (though the point of the federal student loan program wasn’t originally to make money; it was to help students attend college).
DeLisle, the former Republican staffer, is more blunt. He calls the Romney campaign’s argument about costs in direct lending ‘‘a totally phony concept meant to bamboozle people into thinking we’re borrowing from China to make these loans and it’s going to take the federal government down.’’
Q. Any other differences?
A. The Obama administration has aggressively pushed to regulate for-profit colleges, which receive billions in taxpayer-funded student aid dollars but have higher default rates and lower completion rates than other types of schools. Romney says those regulations are misguided and will stamp out innovation and student choice.
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