If anyone in the private sector used the type of accounting that the government uses for loans, people would be lead away in handcuffs. Here's the somewhat unde

If anyone in the private sector used the type of accounting that the government uses for loans, people would be lead away in handcuffs. Here's the somewhat understated footnote in the CBO report that underlies that news article. "CBO’s calculations of subsidy costs for student loans follow the procedures specified in the Federal Credit Reform Act of 1990 (FCRA). Under FCRA, the discounted present value of expected income from federal student loans made during the 2014–2024 period is projected to exceed the discounted present value of the government’s costs. (Present value is a single number that expresses a flow of current and future income or payments in terms of an equivalent lump sum received or paid today; the present value depends on the rate of interest—known as the discount rate—that is used to translate future cash flows into current dollars.) Credit programs that produce net income rather than net outlays are said to have “negative subsidy rates,” which result in negative outlays. The original subsidy calculation for a set of loans or loan guarantees may be increased or decreased by a “credit subsidy reestimate” in subsequent years, on the basis of updated valuations of the present-value costs of the cash flows associated with the outstanding loans and loan guarantees. FCRA accounting, however, does not consider some costs borne by the government. In particular, it omits the risk taxpayers face because federal receipts from interest and principal payments on student loans tend to be low when economic and financial conditions are poor and resources therefore are more valuable. Fair-value accounting methods account for such risk and, as a result, the program’s savings are less (or its costs are greater) under fair-value accounting than they are under FCRA’s rules." On page 63 of: http://www.cbo.gov/sites/default/files/cbofiles/attachments/45010-Outlook2014_Feb.pdf http://www.cbo.gov/sites/default/files/cbofiles/attachments/... See also: http://www.cbo.gov/sites/default/files/cbofiles/attachments/03-05-FairValue_Brief.pdf http://www.cbo.gov/sites/default/files/cbofiles/attachments/... (Fair Value Accounting for for Federal Credit Programs) and http://www.cbo.gov/sites/default/files/cbofiles/attachments/06-28-FairValue.pdf http://www.cbo.gov/sites/default/files/cbofiles/attachments/... (Fair-Value Estimates of the Cost of Federal Credit Programs in 2013)