Washington — For years, partisans on both sides of the direct loan vs. guaranteed loan debate have fought over which program costs taxpayers more.

The latest skirmish occurred in February, when President Bush released a 2009 budget estimating that the direct-loan program would cost the federal government more than the bank-based guaranteed-loan program for the first time since it was created. Lenders claimed victory, saying the numbers proved that cuts in the government subsidies on guaranteed loans had drastically reduced the cost of that program.

But supporters of direct lending pointed out that direct lending remains less expensive for all loans except consolidation loans. They argued that the only reason direct lending now costs taxpayers more over all is that lenders are steering defaulted borrowers into the direct-loan consolidation program.

Now it appears that both sides may have been wrong. A new report by the New America Foundation, a public-policy institution that has supported an expansion of direct lending, concludes that both lending programs cost the government more than the official estimates suggest.

The report, written by a former Congressional budget aide, Jason Delisle, says the government has underestimated the costs of the programs by failing to take into account “market costs” — what a private entity would charge taxpayers to finance and administer the benefits and services the government provides.

Loan companies themselves have urged the government to consider market costs in its estimates, saying the result would more accurately reflect the programs’ true costs. But the New America report accuses lenders of applying the concept unevenly, twisting “a legitimate budget concept into a half-truth” to bolster their arguments.

“They have tried to use the market-cost concept to discredit government estimates … but their reasoning and methodology include serious errors, and many of their conclusions are wrong,” says Mr. Delisle. —Kelly Field