How Education Incorporates Characteristics and Loan Movement into Cost Estimates

Characteristics related to type of school attended and borrower’s level of
education are not accounted for in cost estimates for consolidation loans.

These characteristics are, however, used to define risk categories for nonconsolidation loans.

Education does not use these characteristics to define risk categories for consolidation loans because:

- consolidation loans could reflect multiple underlying loans with
different risk categories, and

- other differences, such as default rates of underlying loans, are more
likely to significantly affect the estimated costs of consolidation loans,
according to Education officials.