Question for you...

Now the government runs the student loan program…yeah! It is supposed to save money because there is no more pesky middle-man (a.k.a., job producing private company)…well damn...that just makes sense (unless you work at that pesky middle man company).

1. According to staffordloan.com the current “subsidized rate” for a student loan is 5.6% and the “unsubsidized rate” is 6.8% (FYI – Stafford loans are amongst the cheapest around). Most folks end up with big PLUS loans which run about 8% today.
2. According to USTreas.gov the rate on a 3-month T-Bill is 0.16% (you know…where *they* are getting the money)

Question 1: If the US government is basically pocketing well over 5.5% on each dollar loaned out…where is the incentive to keep college affordable? The more you borrow…the more they make. Moral Hazard?

USAToday.com: The change, included in the health care overhaul bill that cleared Congress last week, has caused considerable turmoil in the banking industry, which stands to lose billions of dollars in federal subsidies. But for borrowers, the change will be much less drastic. Interest rates for federal student loans won't change, nor will the limits on how much you can borrow. And Uncle Sam is no pushover: If you fail to repay your loans after you graduate, you'll still face stiff penalties.

If the interest rates “won’t change” …and there is no middle man…the gov’t benefits…not the students. I just can’t fathom why saint Obama never thought to pass some of those savings along to the students. Gee, this kind-of-sort-of looks like a “working model” that can be replicated by Team Obama in the future à any lending extended through a private entity can be brought “inside” to boost Federal “returns”.

Question 2: Can you think of any other industry where this model may be applied???

Question 3: Can you think of any issues that may arise from the gov’t controlling who gets loans and at what rate?

In all fairness, the regulations imposed upon the “private lenders” basically made them an extension of the gov’t…but there is just something different about direct control vs. indirect control. And before everyone brings up the recent banking fiasco…just ask yourself…is it better to have “loved and lost” than to have “never loved at all”? Without creativity/risk there is no advancement. Entire industries have arisen from private lenders taking “good” risks (i.e., biotech, computers, green-tech, etc). The banking mess was in fact bad…very bad….but please don’t label ALL private investment as bad…