Obama’s Student Loan Takeover Adds $52 Billion to Deficit According to ‘Fair Value’ Accounting, Says CBO

March 31, 2010 20:05

More smoke and mirrors to justify government expansion by team Obama. Is this doublespeak for we fooled you again?

(CNSNews.com) — The student loan overhaul legislation signed into law by President Barack Obama on Tuesday could add $52 billion to the deficit between 2010 and 2020 when the cost of the market risks and administrative expenses of the loans are taken into consideration, the non-partisan Congressional Budget Office (CBO) reported.

“CBO recently estimated that whereas loans issued in the direct loan program between 2010 and 2020 would reduce the deficit by a total of $68 billion under FCRA accounting, those loans would increase the deficit by $52 billion on a fair value basis,” reads the March 2010 CBO study, Policy Options for Federal Student Loan Programs.( See p. IX of the Summary.)

The CBO report further notes that it explained its calculations about the budgetary impact of the administration’s plan to change the federal student loan programs and the $52-billion addition to the deficit in a March 15 letter sent to Sen. Judd Gregg (R-N.H.), the ranking member of the Senate Budget Committee.

In the study, the CBO explains how the accounting mandated through the Federal Credit Reform Act (FCRA) is the standard procedure used to record the budgetary costs of the government’s direct and guaranteed loan programs.

However, the CBO notes that FCRA cost estimates exclude the value of “market risks” and the loan programs’ “administrative expenses” while the CBO’s  “fair value” estimates takes them into account.


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