I was reviewing the budget proposed by the Bush administration, particularly the Department of Education budget, and was curious what the difference between mandatory outlays and direct loan disbursements.
On the last page (pg. 11), it’s covering the proposed budget for 2007 and has the 2005 actual and 2006 estimated. There are two rows that contain costs for Federal Direct Student Loans: 1) under Spending: Mandatory outlays and 2) under Credit activity: Direct loan disbursements.
It’s the difference between spending to support the program, and the loans themselves. When the government makes a student loan, it doesn’t count as an “outlay” because they assume that the recipient will pay it back. If the recipient defaults, at some point the loan gets reclassified as an outlay. Outlays also include the salaries of the bureaucrats who support the program.
:eek: That many people default of their student loans!?
Are these funds related to payment of the defaulted loan? Or is it related to the Department of Education trying to get the people who owe them money to pay it?
… I’m a little confused. I thought private banks provided the money for student loans, and the loan is guarnteed by the government (not given by the government). Is this not correct? Does the money actually come from the government?
Why do you say “that many”? The outlay for direct loans (2005) was $2.28 billion, which represents both administrative costs and defaults. This is relative to annual disbursements of about $27 billion. This is consistent with a default rate on the order of five percent. It used to be much higher.
I would imagine, both.
Those are “guaranteed loans”. You asked about “direct loans”. Guaranteed loans (Federal Family Education Loans) are the other line item on the budget–with outlays and guarantees instead of outlays and disbursements.
While statistically low, if you assume the average student loan per person is around $20 K, that’s more than 60,000 people that default on student loans. That’s a small cities population… just seems like a lot of people to me.
