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OMB COST ESTIMATE
FOR PAY-AS-YOU-GO CALCULATIONS

Report No: 574
Date: 02/20/2002

  1. LAW NUMBER: P.L. 107-139 (S. 1762)

  2. BILL TITLE: Student Loan Interest Rate Amendments

  3. BILL PURPOSE: (1) Extends current student loan program borrower interest rate formulas through June 30, 2006, and establishes fixed borrower interest rates on loans made thereafter; and (2) permanently extends the availability to lenders of special allowance payments on these loans based on separate lender interest rate formulas.

    4.  

  4. OMB ESTIMATE: P.L. 107-139 extends to June 30, 2006, the interest rate formula for borrowers now in effect in both the FFEL and Direct Loans programs that otherwise would change to new interest rate formulas on July 1, 2003. It also permanently extends the existing formulas that govern the interest rates that lenders earn in the FFEL program, thus enabling lenders to continue receiving interest subsidies. On net, the changes to borrowers' interest rates would reduce the cost to the government of consolidation loans in 2002. In subsequent years, costs to the government are estimated to increase, due both to lower interest rates paid by students and higher net subsidies paid to lenders.

    5. (Fiscal years; in millions of dollars)
    2002 2003 2004 2005 2006 2007
    Net costs.................................... -180 345 875 1,005 995 1,000

     

  5. CBO ESTIMATE:
    6. (Fiscal years; in millions of dollars)
    2002 2003 2004 2005 2006 2007
    Net costs.................................... -180 345 875 1,005 995 1,000

     

  6. EXPLANATION OF DIFFERENCES BETWEEN OMB AND CBO ESTIMATES:

    7. The estimates are the same.

  7. CUMULATIVE EFFECT OF DIRECT SPENDING AND REVENUE LEGISLATION ENACTED TO DATE:
    8. (Fiscal years; in millions of dollars)
    2002 2003 2004 2005 2006 2007
    Outlay effect.............. -180 24,173 24,413 23,832 9,219 1,000
    Receipt effect............ 0 -86,866 -106,319 -107,744 -126,474 0
    Net costs.................... -180 111,039 130,732 131,576 135,693 1,000

    NOTE: The cumulative effect of direct spending and revenue legislation enacted to date is currently estimated to result in an end-of-session sequester. The Administration looks forward to working with the Congress to ensure that an unintended sequester does not occur.