Congress is already paying for loan systems. It should pay for one.

The federal government holds more than $5 trillion in direct loans and loan guarantees. Those loans finance farms, homes, small businesses, students and exports through more than 100 credit programs at about 20 agencies. Each agency also buys, operates and replaces its own loan systems, and none of them share a common lexicon or data standard. The government can’t readily assess its credit risks in real time, compare performance across programs or determine whether an applicant denied at one agency was approved at another.

Sens. Marsha Blackburn, R-Tenn., and Maggie Hassan, D-N.H., with Reps. Brad Finstad, R-Minn., and Raja Krishnamoorthi, D-Ill., introduced legislation to correct that. The Federal Loan Systems Modernization Act would authorize a shared lending platform using commercially available technology, with GSA responsible for acquisition and OMB for coordination. Under the bill, eligibility rules, underwriting criteria, interest rates and servicing policy would remain with the programs. But the back office, meaning intake, underwriting workflow, servicing, document management and fraud detection, would be consolidated and modernized.

In an analysis for the Center for USA Lending, we estimated how the Congressional Budget Office would likely score the bill. We think the net cost would be close to zero. Enactment requires an appropriation in the low tens of millions of dollars over five years for planning, data standards and oversight. After that, agencies pay a cost recovery fee from the same accounts they already use to run their own systems. Because that fee moves money from one federal account to another, CBO would likely treat it as an offsetting collection with no net effect on the deficit. That estimate is correct under the rules, but it omits most of what the bill would save.

On operating costs, we think the government could save between $250 million and $300 million a year once the platform matures, or $1 billion to $1.5 billion over ten years, net of transition costs and after a three-year migration. There are precedents. GAO found that data center consolidation produced $6.24 billion in savings and cost avoidance between 2012 and 2020, and payroll consolidation — the model this bill follows — projected about $1 billion over ten years for a much simpler function. CBO will not count any of it, though, because the bill has no direct impact on any specific appropriation, and an agency that spends less of its funding on one activity may spend the difference on another.

Much of the fraud in federal lending occurs at origination, when an applicant misrepresents their identity, income, eligibility or the existence of the business being financed. SBA's Inspector General estimates that more than $200 billion in pandemic disaster and Paycheck Protection Program funds went to potentially fraudulent actors. When SBA later employed better screening at the front of the process, it blocked 21.3 million duplicate, ineligible and fraudulent applications across its four largest pandemic programs. A consolidated, modern loan management system would give all participating government loan programs the benefit of the same rigorous fraud controls.

Today, though, agencies are replacing their systems one at a time. Ginnie Mae has a modernization contract valued at about $127 million. FHA is spending about $92 million on Catalyst. VA is recompeting its home loan guaranty systems, which cost $328 million over four years. USDA announced its own effort in June. None of these systems are designed to exchange data with the others. Congress is funding this work either way, and the question is whether it buys numerous incompatible systems or one, or perhaps a few, that every program can use.

Two administrative steps would help. OMB could require agencies to report operational and avoided modernization savings in their budget submissions. OMB and Treasury could require every migrating program to screen applicants against Treasury's Do Not Pay service, which helped agencies prevent, detect and recover $11.7 billion in fiscal 2025, and to report losses. That would give CBO the evidence it needs to score fraud savings in the future.

Farmers waiting on loans before planting, first-generation homebuyers and small businesses without access to bank credit would get their money faster and with less exposure to fraud. Congress should pass the bill.

Doug Criscitello, former CFO at SBA and HUD, is the executive director of the Center for USA Lending, a nonpartisan organization which advances modern design and delivery of federal credit programs. Robert Shea, former Associate Director at OMB, is CEO of GovNavigators.