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Student loans are an important component of the overall federal programs to assist postsecondary students. During this fiscal year, 2.3 million loans amounting to nearly $5 billion will go to students through the Guaranteed Student Loan (GSL) and National Direct Student Loan (NDSL) programs. The total federal cost of these loan programs will be approximately $1.3 billion, which is more than 60 percent of all federal student assistance.

If current trends continue, the amount of student lending and the federal cost of student loan programs will increase substantially. Perhaps more importantly, if federal higher education resources are constrained, the growth in loan programs will restrict the funding available for other forms

The Congress thus faces two difficult resource allocation questions as it considers reauthorization of student loan programs:

• What are the effects of different student loan policies on federal higher education goals and on the federal budget?
  
  
• What is the appropriate allocation of scarce resources between loans and other forms of student aid?

Today, my testimony will deal primarily with the first of these questions.

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