Mandatory Spending
Function 500 - Education, Training, Employment, and Social Services
Reduce or Eliminate Subsidized Loans for Undergraduate Students
CBO periodically issues a compendium of policy options (called Options for Reducing the Deficit) covering a broad range of issues, as well as separate reports that include options for changing federal tax and spending policies in particular areas. This option appears in one of those publications. The options are derived from many sources and reflect a range of possibilities. For each option, CBO presents an estimate of its effects on the budget but makes no recommendations. Inclusion or exclusion of any particular option does not imply an endorsement or rejection by CBO.
| Billions of dollars | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | 2024 | 2015-2019 | 2015-2024 | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Change in Outlays | |||||||||||||
| Restrict access to subsidized loans to students eligible for Pell grants | -0.4 | -0.9 | -1.2 | -1.3 | -1.3 | -1.4 | -1.4 | -1.5 | -1.5 | -1.6 | -5.1 | -12.5 | |
| Eliminate subsidized loans altogether | -1.2 | -2.9 | -3.7 | -3.9 | -4.1 | -4.3 | -4.4 | -4.5 | -4.7 | -4.8 | -15.9 | -38.6 | |
Note: This option would take effect in July 2015. Estimates are relative to CBO’s August 2014 baseline projections.
This option includes two possible changes to subsidized student loans, which, by the Congressional Budget Office’s estimates, will constitute about half of the dollar volume of federal direct loans to undergraduate students for the 2014–2015 academic year. (“Subsidized loans” do not accrue interest while students are enrolled in school and during certain other periods when borrowers may defer making payments.) In the first alternative, access to subsidized loans and the associated interest subsidies would be restricted to students eligible for Pell grants. In the second alternative, subsidized loans would be eliminated altogether.