CBO Director Casts New Doubt on Student Loan Plan

Arlington, Virginia--July 28, 2009. The director of the non-partisan Congressional Budget Office (CBO) has acknowledged that eliminating the private sector from student loans saves billions less than previously announced. The acknowledgement, in a July 27 letter to Senator Judd Gregg, indicates the CBO's own budget estimate may have over estimated savings by more than $33 billion.

Consumer Bankers Association President Richard Hunt welcomed the publication of the CBO letter and issued the following statement:

"CBO director Elmendorf's letter will change the debate on student loans. Those legislators supporting the plan to eliminate the role of the private sector from student loans have largely done so on the basis of claims that the proposal would save more than $80 billion over ten years. Director Elmendorf's letter suggests that part, if not all, of the claimed ‘savings' are illusory.

"As the House of Representatives prepares to consider legislation based on the Obama plan, more than 70 percent of all schools remain in the bank-based Federal Family Education Loan program. These schools do not want to deal with a government monopoly but to date have been muted in questioning it because of the savings claim associated with the proposal. CBA hopes these schools and legislators in the House and Senate will now ask themselves a new question: Is eliminating the private sector from student lending worth it if the savings are not there?

"Congress should be working to strengthen the Federal Family Education Loan Program, not dismantling it. The goal of student loan legislation this year should be to help borrowers by assuring the highest quality of loan servicing and efficiency, which can only be accomplished by encouraging choice and competition.

"CBA will continue to work with Democrats and Republicans interested in focusing on the interests of student borrowers and on taxpayers. Our goal is to encourage the enactment of legislation embracing choice and competition as the best means of preserving the relationship banks have with students to help them use education loans to achieve their dreams."

The Consumer Bankers Association is the recognized voice on retail banking issues in the nation’s capital. Founded in 1919, CBA provides leadership, education, research and federal representation on retail banking issues. For more information, please contact Marybeth Leongini, 703.276.3887 or mleongini@cbanet.org or visit www.cbanet.org.