Today's NYT reports that the Obama administration is continuing its war on the free market, this time taking aim at the private student loan industry:

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Of course, the banks point out the obvious, that this plan:
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Yet, denying the infallibility and efficiency of the free market, the administration actually claims their approach will save money, reasoning that:
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Such claims of savings should, obviously, be seriously doubted. Consider this lame attempt to explain how pushing private lenders out could possibly result in fewer costs:

Or, listen to more shilling from another NYT columnist, who remarkably rails against the choices currently offered by private lenders:

Thus, we go further down the rabbit-hole of socialism.

Not really and I'm sure you don't really believe statement above. Government guarateed loans already have a socialist tinge to them so it's not really a private sector vs. public system issue. Government was essentially having private sector originate, process, and administer loans that the government took all of the default rish in. It would different if the private sector was originating, processing, and administering the loans while taking all of the default risk and the government came along and put them out of business by their policies. I might add that if the government takes all of the default risk and lends the money such that it is not fully compsensated for taking the default risk then the taxpayers are subsidizing the loans.

What free market are you talking about?

Yeah, I think I'd rather have full government sponsored loans than the kind of backroom guaranteed profit loans that some of these private companies have managed to milk for years.

This is probably the least horrible idea I've seen out of this administration.

It actually makes pretty much complete sense.

There's a question being begged in the OP.

Perhaps the free market WOULD be "more expensive" in this case. Can you think of a reason that might be?

I'm pretty sure that not all student loans are guaranteed by the government. What is going to happen to those?

I think the answer is "nothing," but not sure.

Government involvement in student loans has led to huge cost increases:

http://www.porchillustrated.com/?p=16

From the article: "...subsidizing the college loan industry has led to a huge increase in tuition. Subsidizing consumption allows the producer to increase the cost while knowing that the demand will stay the same (in a completely elastic good barring other factors). Luckily for colleges (and unfortunately for Joe college-goer), because of the aforementioned factors, degrees have become very inelastic. So, when the college loan industry gets government subsidies, they now have an incentive to increase both the number of loans and the amount per loan. Colleges, aware of this fact, can now increase their prices without affecting the demand."

Agreed. Absolutely.


Furthermore, when I get my bachelor's degree in about a year, it's going to be worth about ****. The federal loans have made it so easy to get one, increasing the amount of individuals who have one, that they are becoming worthless. So not only am I paying (a lot) more, but the product I get out of it isn't worth what it once was. Double fail imo.

Well we can argue if government assistance in higher education is a net positive or negative all we want, but it's here to stay. Of course government involvement will lead to horrible inefficiency but this is very low on my hit list of government ills.

Of all the garbage federal programs, opening the door to higher education isn't that bad. I certainly prefer government programs that require effort from its citizens. And it's certainly preferable to the policy of homeownership as an American birthright, as increased human capital and education-driven technological advancement is better for long-term growth than McMansions.

If we allow that these programs are going nowhere, then government attempting to capture benefits (since they've been eating the risk all along) is quite reasonable. For the first time, this administration seems to understand the concept of incentives.

Sounds like you are making a bad investment?

indeed. well, I plan to get a PhD in the years after graduating, so i'll be okay imo.

I agree with the effect completely but think the cause has much more to do with colleges handing out degrees like they are big macs to anybody that can pay for one (or more accurately anybody that can go into debt with these loans to get one). Colleges requiring more than a computer, internet connection, and 6th grade reading level to get a degree would increase their value a lot.

In all actuality, dealing with the crappy financial aide office was probably the most difficult part of obtaining my degree.

A more accurate thread title:

Less socialism: Obama ends indirect subsidies to banks handing out student loans

implied assertions in this post:

-in a perfect free market universe, there would be less bachelor's degrees
-sub-implication: there would be less people attending college
-this would be a good thing (why would we want to "dilute the value" of a degree, after all?)
-there is no inherent 'value' in an educated populace (if there was, the free market would provide it over time)(I guess this goes on and on down a recursive loop)

implied assertion in this and every other post like it:

-OP is a special snowflake that would get a degree no matter how much it cost or how few lenders there were, because either:

a)OP has the money to do so on his own or
b)the free market would instantly recognize his aptitude for learning (as opposed to every other person in college) and would do a very good job of sorting the wheat from the chaff, as it were

just thought I'd throw this post out there, carry on

Implied assertion:

* degree = educated and no degree = uneducated

carry on

Student loan companies are freaking out about this, I get a ton of emails from my lender to like bother my congressman about how they are going to "take away my choices" or whatever.


pvn, degree=educated isn't an implied assertion, it is the definition of those words.

[QUOTE=adanthar;11789957]implied assertions in this post:

No, there'd be the correct amount bachelor degrees for the circumstances of the time.

No, there'd be the correct number of people attending college for the circumstances of the time. As a result, you wouldn't have (what is it, half?) the graduating population spend thousands of dollars on a degree and then be unable to get a job afterwards.

It would result in more employed individuals imo, why do you want people to be unemployed

There's a value in the correct amount of people being educated. 300,000,000 educated Americans all applying for 100,000,000 educated job positions wouldn't be so great.


Cost of college would go down, so people would be able to afford degrees much easier. At the same time, the government wouldn't be driving millions of jobs out of the country with regulations, and so I might not even want to get a degree.

You couldn't learn what would be necessary to acquire a degree without actually acquiring it?

I'm with you on this one Taso, but wouldn't it be cool if your undertitle said "Special Snowflake"?

it's a good thing, too, or those poors would be pretty screwed (but fortunately they can get edumacated in the school of life)

if you're wondering why your philosophy's not getting much traction, you might want to start with the seeming contradiction between "requires an educated populace" and "the poors don't need no book learnin'"

just tossing that out there too, carry on

NO ainec

for my own anecdotal evidence..... without the private loan industry my wife wouldnt be able to go to school right now

It's more like degree->educated than degree=education, but a population with more college degrees is going to be better educated than one with fewer, right?


NeBlis- I'm going to guess that you don't understand what the private loan industry is. Just because a loan comes from a bank and not the government doesn't mean it isn't a government-backed student loan.

Drug convictionaments? (A policy I've never understood.)

As far as I can tell, this will eliminate private banks from servicing federal loans. I see nothing about preventing banks from issuing private loans.

RTFA.