President Obama signed the Student Aid and Financial Reconciliation Act (SAFRA) into law, following a long and controversial battle in the Senate. Much of the debate involved the proposal to terminate a program that provided subsidies to private lenders, and to move all federal lending to the Direct Loan (DL) program, with the savings from eliminating the subsidies being used to fund a number of other initiatives.
Many who opposed SAFRA were concerned that the actual savings from converting all loans to DL would be much lower than the Congressional Budget Office's estimate of $61 billion--and possibly non-existent. The CBO had to score the bill using some dubious assumptions, such as ignoring interest rate and market risks, as well as administrative costs. With the government overseeing a total student loan portfolio of $621.1 billion and growing, deficit hawks were concerned that the new spending initiatives would inflate the deficit.
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