The Student Aid Alliance wrote to the Chairman and Ranking Member of the Joint Economic Committee expressing its “strong concern” with the use of “fair-value” estimates for federal credit programs. The Alliance urged the Committee to support students by supporting accuracy and transparency in budget scoring and rejecting the fair value methodology that will likely result in policy choices detrimental to students. Below is our letter to Sen. Dan Coats, Chairman, and Rep. Carolyn Maloney, Ranking Member of the Joint Economic Committee.
On behalf of the over eighty member organizations and institutions of the Student Aid Alliance, which represents students, college presidents, and other educators who support federal student aid, we write to express our strong concern with the use of so-called “fair-value” estimates for federal credit programs. As the Joint Economic Committee explores this issue, we would like to highlight the significant damage a move to this scoring method would have for the federal student loan programs.
We believe that policy decisions should be made based on the real impact to the Treasury of those decisions. “Fair-value” estimates depend on the inclusion of phantom costs to the scoring of federal credit programs, creating the illusion of deficits without any corresponding impact on the Treasury. Far from better-informing the annual budget and appropriations process, the production of fair-value scores would greatly complicate the process and reduce transparency and comparability.
The implications for student loans of such an approach are significant, and dangerous. CBO estimates that shifting from the current, accurate method to “fair-value” scoring would show an increased deficit of $223 billion over ten years, with no changes to the underlying programs. As Congress considers reauthorization of the Higher Education Act, the use of these erroneous, phantom costs will inevitably force policy choices that will be detrimental to students.
We urge you to support America’s students by supporting accuracy and transparency in budget scoring, and rejecting the gimmicks inherent in the “fair-value” methodology.
Molly Corbett Broad
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