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MEMORANDUM

SUBJECT: CBO February 2013 Baseline Projections for the Student Loan Program.
Attached are five tables that detail the costs, loan volumes, and subsidy rates for the direct student loan program for the February 2013 CBO
Baseline. Below each table is summarized:

Table 1. Includes the cost projection for each budget account associated with the student loan programs.
Table 2. Includes the loan volume and subsidy rate projections for the direct student loans.
Table 3. Includes the detailed components of the federal student loan subsidy rates for fiscal year 2013.
Table 4. Includes the Student Aid Administration expenditures.
Table 5. Includes the interest rate forecasts used in the projections associated with current and outstanding student loans.
For your information, below is a summary of the definitions of budget authority, program obligations, and outlays as they apply to the student
loan program subsidy or "program" accounts:
Subsidy Budget Authority: Subsidy budget authority figures express what total subsidy costs would be if all the loans for which an
application was received during a year were made. But all loans are seldom made--only about 90 percent. This is because prospective
borrowers either do not show up for school or decide not to take all or part of the loan.
Subsidy Obligations: Subsidy obligations are the costs associated with all loans for which there actually will be at least one cash
disbursement [shown on the attached tables as Net Annual Loan Volume]. Typically, the subsidy obligation estimates are not included on
Subsidy Outlays: Subsidy outlays reflect the subsidy obligations adjusted for the timing of the loan dollar disbursements. Because of the
multiple disbursement requirements and the timing of the academic school year calendars compared to the federal fiscal year, only about twothirds of the dollars are disbursed to the borrowers during the first fiscal year. The remaining dollars are disbursed in the following year.

Table 1
STUDENT LOAN PROGRAM BASELINE : CBO February 2013 BASELINE BUDGET ACCOUNT TOTALS
(by fiscal year, in millions of dollars)
2013
2014
2015

2016

2017

2018

2019

2020

2021

2022

2023

GUARANTEED LOANS:
Guaranteed Loan Program Account (Subsidy)

Budget Authority
Outlays

0
0

0
0

0
0

0
0

0
0

0
0

0
0

0
0

0
0

0
0

0
0

Guaranteed Loan Program Liquidating Account

Budget Authority
Outlays

0
-335

0
-281

0
-235

0
-197

0
-165

0
-134

0
-111

0
-93

0
-77

0
-65

0
-65

Federal Student Loan Reserve Fund

Budget Authority
Outlays

339
339

244
244

219
219

192
192

180
180

159
159

131
131

109
109

80
80

30
30

28
28

Subtotal, Guaranteed Loans Budget Authority


Outlays

339
4

244
-37

219
-16

192
-5

180
15

159
25

131
20

109
16

80
3

30
-35

28
-37

Budget Authority
Outlays

-43,668
-37,414

-38,534
-35,750

-29,374
-28,933

-19,341
-20,379

-11,514
-12,784

-8,163
-8,415

-8,497
-7,547

-8,798
-7,831

-9,148
-8,131

-9,517
-8,458

-9,892
-8,794

Student Aid Administration (Discretionary)

Budget Authority
Outlays

1,043
1,015

1,063
1,047

1,086
1,073

1,113
1,097

1,140
1,123

1,169
1,151

1,197
1,179

1,226
1,208

1,254
1,236

1,284
1,265

1,314
1,295

Student Aid Administration (Mandatory)

Budget Authority
Outlays

993
937

1,130
1,049

1,190
1,151

1,270
1,235

1,356
1,321

1,449
1,410

1,546
1,506

978
1,278

1,034
1,104

1,105
1,112

1,180
1,162

Subtotal, Student Aid AdministrationBudget Authority


Outlays

2,036
1,952

2,193
2,096

2,276
2,224

2,383
2,332

2,496
2,444

2,618
2,561

2,743
2,685

2,204
2,486

2,288
2,340

2,389
2,377

2,494
2,457

-41,292
-35,458

-36,098
-33,691

-26,878
-26,725

-16,766
-18,053

-8,838
-10,325

-5,387
-5,829

-5,623
-4,842

-6,486
-5,328

-6,780
-5,788

-7,098
-6,116

-7,370
-6,375

DIRECT LOANS:
Direct Loan Program Account (Subsidy)

STUDENT AID ADMINISTRATION:

TOTAL STUDENT LOANS

Budget Authority
Outlays

TABLE 2
TOTAL DIRECT LOAN PROGRAMS, CBO February 2013 Baseline
(by fiscal year)
2013

TOTAL ALL NEW LOANS [ New Loans Only ]

2015

2016

2017

2018

2019

2020

2021

2022

2023

105,945
21,516
$4,924

108,866
21,761
$5,003

112,528
22,169
$5,076

116,567
22,630
$5,151

120,506
23,072
$5,223

124,426
23,501
$5,294

128,363
23,936
$5,363

132,336
24,378
$5,429

136,392
24,796
$5,501

140,482
25,208
$5,573

144,761
25,637
$5,646

-36.48%

-31.34%

-23.16%

-14.77%

-8.56%

-5.92%

-5.97%

-6.00%

-6.05%

-6.11%

-6.17%

27,961
9,318
$3,001

28,129
9,436
$2,981

28,934
9,627
$3,006

29,730
9,805
$3,032

30,542
9,985
$3,059

31,339
10,160
$3,084

32,206
10,351
$3,112

33,142
10,548
$3,142

34,017
10,720
$3,173

34,932
10,899
$3,205

35,902
11,087
$3,238

-13.90%

-12.49%

-5.01%

59,125
10,815
$5,467

60,516
10,885
$5,559

62,039
11,052
$5,613

63,967
11,288
$5,667

65,849
11,511
$5,721

67,751
11,730
$5,776

69,637
11,943
$5,831

71,559
12,162
$5,884

73,495
12,379
$5,937

75,367
12,582
$5,990

77,315
12,793
$6,043

-39.93%

-33.30%

-25.01%

-16.31%

-9.86%

-7.08%

-7.08%

-7.05%

-7.05%

-7.05%

-7.05%

8,362
521
$16,049

9,341
563
$16,578

10,300
602
$17,109

11,237
636
$17,656

12,108
665
$18,204

12,932
689
$18,768

13,708
709
$19,331

14,447
726
$19,911

15,304
746
$20,508

16,207
767
$21,123

17,157
789
$21,757

-63.60%

-54.84%

-43.71%

-32.45%

-24.56%

-21.23%

-21.23%

-21.23%

-21.23%

-21.23%

-21.23%

10,498
862
$12,185

10,881
875
$12,429

11,254
888
$12,677

11,633
900
$12,931

12,008
910
$13,189

12,404
922
$13,453

12,812
934
$13,722

13,188
942
$13,997

13,576
951
$14,277

13,976
960
$14,562

14,387
969
$14,853

-55.59%

-49.00%

-40.75%

-32.05%

-25.55%

-22.75%

-22.75%

-22.75%

-22.75%

-22.75%

-22.75%

Net Annual Loan Volume ($ millions)


Net Number of Loans (thousands)
Average Loan Amount
Subsidy Rate

2014

b, c, d

SUBSIDIZED STUDENT LOANS [ New Loans Only ]


Net Annual Loan Volume ($ millions)
Net Number of Loans (thousands)
Average Loan Amount
Subsidy Rate

b, c, d

2.00%

7.27%

9.56%

9.58%

9.58%

9.60%

9.58%

9.58%

UNSUBSIDIZED STUDENT LOANS [ New Loans Only ]


Net Annual Loan Volume ($ millions)
Net Number of Loans (thousands)
Average Loan Amount
Subsidy Rate

b, c, d

GRADPLUS STUDENT LOANS [ New Loans Only ]


Net Annual Loan Volume ($ millions)
Net Number of Loans (thousands)
Average Loan Amount
Subsidy Rate

b, c, d

PARENT LOANS [ New Loans Only ]


Net Annual Loan Volume ($ millions)
Net Number of Loans (thousands)
Average Loan Amount
Subsidy Rate

b, c, d

a. Totals exclude consolidation loans. Components may not sum to totals because of rounding.
b. The subsidy rate is the net present value of the future federal cash flows associated with the loan dollars disbursed to borrowers each year. For example, the 2014 federal cost associated with the $108,866 million in
new loan volume would be -$34,119 million or -31.34% of the new loan volume [$108,866 * -.3134 = -$34,119]. In other words, the federal government will save on average about 31 cents for each new dollar loaned in
2014.
c. Subsidy rates do NOT include federal administrative costs associated with disbursing and servicing loans. Those administrative costs are included in the budget on a cash basis [see Table 4.].
d. Subsidy rates were calculated using the CBO February 2013 interest rate forecast.

TABLE 3
Detail of the Fiscal Year Values for the 2014 Federal Subsidy Rates
[Note: The Federal Subsidy Rates are Shown in Percent for Each Dollar Loaned]
Direct Subsidized Loans:
Fees
Disbursement
Principal Repaid
Interest Paid
Other
Total Subsidy Rate
Direct Unsubsidized Loans:
Fees
Disbursement
Principal Repaid
Interest Paid
Other
Total Subsidy Rate
Direct GradPLUS Loans:
Fees
Disbursement
Principal Repaid
Interest Paid
Other
Total Subsidy Rate
Direct Parent Loans:
Fees
Disbursement
Principal Repaid
Interest Paid
Other
Total Subsidy Rate

-1.00%
99.80%
-75.18%
-36.56%
0.44%
-12.49%

-1.00%
99.80%
-90.66%
-41.59%
0.15%
-33.30%

-3.99%
99.75%
-74.62%
-75.98%
0.00%
-54.84%

-3.99%
99.71%
-82.58%
-62.14%
0.00%
-49.00%

Notes:
Components may not sum to totals because of rounding.
Because of changes in the economic forecast, subsidy rates are substantially different for years later than 2014.

TABLE 4
STUDENT AID ADMINISTRATION--CBO February 2013 Baseline
MANDATORY ADMINISTRATIVE COSTS:
(by fiscal year, in millions of dollars)
2013
2014
2015

2016

2017

2018

2019

2020

2021

2022

2023

Outstanding Guaranteed Loans:


Budget Authority
Outlays

346
362

300
312

284
288

269
272

255
259

244
247

234
237

205
212

185
190

179
180

174
175

Budget Authority
Outlays

130
130

123
123

114
114

104
104

91
91

78
78

66
66

56
56

49
49

43
43

30
30

Budget Authority
Outlays

476
492

423
435

398
402

373
376

347
350

322
325

301
303

261
268

234
239

222
223

204
205

Administrative Account

Budget Authority
Outlays

307
291

367
352

428
413

492
476

559
542

628
611

699
682

773
754

849
830

926
907

1,007
987

Nonprofit Loan Servicers

Budget Authority
Outlays

341
284

463
385

479
451

509
486

542
520

576
553

612
587

0
312

0
84

0
24

0
0

Subtotal Budget Authority


Outlays

647
575

830
737

907
863

1,002
962

1,101
1,062

1,204
1,163

1,311
1,269

773
1,066

849
914

926
931

1,007
987

Budget Authority
Outlays

1,123
1,067

1,253
1,172

1,304
1,265

1,374
1,339

1,447
1,412

1,527
1,488

1,612
1,572

1,034
1,335

1,083
1,153

1,148
1,155

1,210
1,192

Administrative Account

Default Prevention
(included in the Federal Student
Loan Reserve Account)
Subtotal

Direct Loans:

Total Mandatory

DISCRETIONARY ADMINISTRATIVE COSTS


(by fiscal year, in millions of dollars)
2013
2014
2015
Budget Authority
Outlays

2016

2017

2018

2019

2020

2021

2022

2023

1,086
1,073

1,113
1,097

1,140
1,123

1,169
1,151

1,197
1,179

1,226
1,208

1,254
1,236

1,284
1,265

1,314
1,295

(by fiscal year, in millions of dollars)


2013
2014
2015

2016

2017

2018

2019

2020

2021

2022

2023

2,487
2,436

2,587
2,535

2,696
2,639

2,809
2,751

2,260
2,543

2,337
2,389

2,432
2,420

2,524
2,487

1,043
1,015

1,063
1,047

TOTAL ADMINISTRATIVE COSTS

Budget Authority
Outlays

NOTE: Components may not sum to totals because of rounding.

2,166
2,082

2,316
2,219

2,390
2,338

TABLE 5
CBO February 2013 Baseline Forecast

HISTORICAL INTEREST RATES BY FISCAL YEAR


BER 91-Day Treasury Bill Rate:

1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012

15.25%
12.09%
8.69%
9.89%
8.16%
6.63%
5.81%
6.39%
8.42%
7.92%
6.17%
3.89%
3.06%
3.78%
5.65%
5.21%
5.17%
5.12%
4.55%
5.73%
4.53%
1.78%
1.13%
1.12%
2.75%
4.57%
4.86%
2.18%
0.21%
0.12%
0.08%
0.07%

PROJECTIONS OF INTEREST RATES BY FISCAL YEAR


BER 91-Day Treasury Bill Rate:

2013
2014
2015
2016
2017
2018

a, b

0.07%
0.09%
0.14%
0.16%
1.00%
2.97%

Discount Rate--10-Year Zero Coupon Bond


2018

5.20%

a. BER stands for bond equivalency rate.


b. The cash flows of the student loan programs are discounted using a matrix of different zero coupon bonds. The rate shown here is the forecast for a 10-year
zero coupon bond for fiscal year 2018. Thus, the 10th year of cash flows from loans made during 2018 would be discounted by this rate. It is shown here for
illustrative purposes.