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Posted on 09/15/2007 5:20:49 AM PDT by shrinkermd
If you know anything at all about the federal student loan program, you will not have been surprised by the scandal of recent months. The only amazing thing is that it has taken so long to arrive. Here's how the program works: Banks and other private companies lend money to students. The federal government pays part or all of the interest -- currently 7% or 8%. The government also guarantees the loans.
What is wrong with this picture? Well, the government itself borrows the odd nickel to finance the national debt. This borrowing, obviously, is also guaranteed by the government. For that reason, it carries an interest rate of only 3% or 4% If the government can borrow money at 3% or 4%, why should it be paying 7% or 8% for the privilege of guaranteeing loans to someone else? Wouldn't it make more sense for the government to loan out the money itself?
That is the $4-billion question (the approximate annual cost of the interest subsidy). And the answer is: Of course that would make more sense. It is what any levelheaded businessperson would do. And what is stopping the government from behaving like a levelheaded businessperson? Not those head-in-the-clouds Democrats. It's the Republicans, who adopted the student loan "industry" in its infancy, like a stray cat, and have nurtured it ever since
(Excerpt) Read more at latimes.com ...
No.
If the federal government got out of the student loans business then banks wouldn’t suddenly stop giving student loans. They would just require co-signers like I had to do. And States could take care of the rest if they want.
As there is nothing in the Constitution that even remotely authorizes the Department of Education, it is time that we drop it.
When I went to pay my student loan (from N.C. State) off early, the lady thought I was crazy. She told me that many people don’t bother to pay it back at all.
I'm surprised they didn't take your degree away from you. Didn't you learn anything in college? The government is supposed to take care of all of your responsibilities!
If the government got out of the loan business behavior like that would stop fast.
I wonder how true that still is. The IRS now yanks tax refunds of people who don't pay back their loans.
I had a friend back in college (early 80s) who used to brag about how he wasn’t going to pay back his student loans. Then he graduated and found out the consequences of his boast: ruined credit, penalties, etc. Needless to say, he paid them back. Even back then, the system appeared to have teeth to bring scofflaws into line.
“I wonder how true that still is.”
Been doing some Googling and the national default rate hit an all time low in 2003 at 5.4%.
I also believed that college tuition was so high because very few students paid with their own money. If the free money dried up there would be less people to afford college at the current rates. The colleges would either need to reduce rates to attract students or live with a small student body. I think the same is one of the big problems with medical costs.
I hope your degree wasn’t in Eonomics. You payed back a loan at something like 3% EARLY???
I hope *your* degree (if you have one) isn’t in Economics. You’d continue to pay interest even if you had the funds to retire the debt??? Even if one can write off the interest, renting money when it’s not necessary is a bad buy.
Not if you can get a greater return on the rented money than the rent you're paying. But many of us got our student loans at rates far above the 3-4%, so I paid off early when my student loans had higher interest rates than I could get on other loans.
Well, they aren't officially called the National Defense Student Loans anymore...and it includes some non-citizen eligibility (and Temporary Residents are no longer eligible). But your main point still stands.
But nowdays, it also seems that borrowing from China to do this might not be the best way for us to help the natinoal defense. Yet it seems that the bottom line of Michael Kinsley's push is that he believes the middleman should be cut out. So, I suppose our students should just borrow directly from China, with guarantees by the US government?
My degree isn’t economics but M.D. which the way things are going it turns out probably wasn’t a good idea when I set out to get started in the 70s. However it is a hell of a lot better than “machinist” which is what I was at the time.
I had the money. I guess I could have made a ton of $$ if I’d bought “Etoys.com” “Enron”, “Global Crossing” or some other rock-solid investment. </sarcasm>
Actually, I hate being in debt to anyone, which is why I also paid my truck off the same week (in 1997). Still driving it, too.
I may not get rich, but I also don’t have to remember to make those payments every month either.
Now if I could just pay off that mortgage.
Libertarian ping! To be added or removed from my ping list freepmail me or post a message here.
Yup.
It's mandate. The government is not a bank...or in the case in IL, not a casino. (The government wants to run casino$)
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