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Benefits
TAXPAYERS
- Federal student loans provide access to higher education for millions of students at relatively little cost to taxpayers. In the student loan program, federal dollars provide leverage to bring billions of dollars in financial aid to students pursuing higher education.
- The FFELP and FDLP are both federal entitlement programs, which means that any student that meets the federal eligibility is entitled to receive a student loan. Perkins loans are funded through the federal appropriations process with the amount borrowers receive, determined by their financial need and the amount of Perkins dollars available to participating institutions.
- Much has been written about the explosive growth of federal entitlement programs over the past decade. From 1991 to 2001, federal entitlement spending increased 33 percent (after adjusting for inflation). During the same period, FFELP spending declined 83 percent.
- Since 1991, the amount of outstanding FFELP loans has tripled, after adjusting for inflation. Yet the cost of the program has declined from $6.1 billion to $1.0 billion.
- The decline in FFELP costs has been the result of significant improvements in default prevention, a sizable increase in the amount collected on defaulted loans, and little growth in the amount paid to subsidize borrowers' interest costs.
- Working together, students, schools, guarantors, lenders, servicers and the U.S. Department of Education have prevented billions of dollars of student loans from defaulting. For example, in the FFEL program in FY 2001 the dollar volume of delinquent student loans returned to repayment was $22 billion.
- Default costs for FFELP have declined by nearly half (in constant dollars) even with the tripling of outstanding loan volume. Defaults have declined from nearly 6% of the outstanding portfolio to 1.7%.
- At the same time, collections on loans that do default have increased substantially-total collections have tripled in constant dollar terms since 1991. Legislative changes in the past decade have increased the number of tools available to guarantors, such as federal and state tax offsets.
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