New CBO Projections Spell Out Government Profits from Student Loan Deal

On August 12, the Congressional Budget Office (CBO) released its estimates of the subsidy rates on federal student loans before and after enactment of the Bipartisan Student Loan Certainty Act of 2013 signed by President Obama earlier this month. These CBO estimates show:

• That the government will profit from Stafford graduate, graduate PLUS, and parent PLUS loans in every year over the next decade, and beginning in 2016 will make even more profit from them than had been projected under prior law.  Note that CBO does not separate estimates for unsubsidized loans to undergraduate students versus graduate students, so the unsubsidized line understates the profits CBO is projecting from Stafford graduate loans.
• That the government will still profit off of subsidized Stafford undergraduate loans for the next two years (but less so than if the rates had doubled to 6.8%), after which subsidized loans will require a subsidy that is equal to or greater than the subsidy under prior law.

Ultimately, these estimates underscore the increased profits projected from federal student loans under the new law as well as the shift in costs to students starting a few years from now, especially graduate students and parents of undergraduates.