Under the Federal Family Education Loan Program (FFELP) and the Federal Direct Loan Program (FDLP), the government guarantees and makes consolidation loans to help borrowers manage their student loan debt. By combining loans into one and extending repayment, monthly repayments are reduced. Unlike other student loans, consolidation loans carry a fixed interest rate. Recently, trends in interest rates and consolidation loan volume have increased overall federal costs, leading Congress to consider cost reduction proposals. Under the Federal Credit Reform Act, the government calculates, for budgetary purposes, the net cost, or "subsidy cost," of extending or guaranteeing credit over the life of loans. GAO was asked to provide information on the budgetary effects of making consolidation loans exclusively through FDLP. Providing consolidation loans exclusively through FDLP in fiscal year 2006 could yield estimated budgetary cost savings of about $3.1 billion, based on subsidy cost estimates in the President's fiscal year 2006 budget. However, actual savings would remain unknown until all loans made in fiscal year 2006 are repaid and actual interest rates over the life of the loans are known. The estimated savings could change substantially as future reestimates of subsidy costs incorporate actual results as well as reflect changes in key assumptions about the future, such as interest rates, loan performance, and loan volume. The actual impact on lenders and borrowers is difficult to predict. However, according to lenders, consolidating all loans through FDLP would reduce lender revenue and certain borrower benefits provided by FFELP lenders. Briefing slides are contained in the appendix. [This report was produced by the United States Government Accountability Office.]