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Guaranteed vs. Direct Lending: The Case of Student Loans

2. Outline. Introduction and Program OverviewComparison of Cost DriversCash FlowsEstimatesConclusions. 3. Introduction. Two competing loan programs: direct and guaranteedSimilar terms for studentsBut structured very differentlyDifferent returns to other stakeholders (lenders, schools, guarantee agencies) Schools free to choose between programs$381 billion of loans outstanding in 2005Dramatically different budget costs (e.g. FY2007)2% subsidy rate for direct program 10% subsidy rate34257

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Guaranteed vs. Direct Lending: The Case of Student Loans

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