Estimates of the Cost of Federal Credit Programs in 2021

The federal government supports some private activities by offering credit assistance to individuals and businesses. That assistance is provided through direct loans and guarantees of loans made by private financial institutions. In this report, CBO estimates the lifetime costs of new loans and loan guarantees that are projected to be issued in 2021. The report shows two kinds of estimates: those that were created by following procedures currently used in the federal budget, as prescribed by the Federal Credit Reform Act of 1990 (FCRA); and those that account for the market value of the government’s obligations, which are called fair-value estimates. Most of the FCRA estimates were produced by other federal agencies, although CBO used FCRA procedures to estimate the budgetary effects of the largest federal credit programs. The fair-value estimates were produced by CBO.

Using FCRA procedures, CBO estimates that new loans and loan guarantees issued in 2021 would result in savings of $41.8 billion. But using the fair-value approach, CBO estimates that those loans and guarantees would have a lifetime cost of $46.8 billion. More than three-quarters of the difference between those amounts is attributable to three sources:

• The guarantees that Fannie Mae and Freddie Mac are projected to make in 2021, analyzed on a FCRA basis, would save the federal government $28.5 billion. Under fair-value accounting, however, the guarantees would cost $1.1 billion.
• The Department of Education’s student loan programs are projected to save $3.2 billion on a FCRA basis but to cost $16.9 billion on a fair-value basis.
• The Department of Housing and Urban Development’s (HUD’s) loan and loan guarantee programs are projected to save $10.5 billion on a FCRA basis but to cost $7.4 billion on a fair-value basis.