Because the higher the profits, the lower the consumer costs! Its all in the corporate whore bible.
Because the higher the profits, the lower the consumer costs! Its all in the corporate whore bible.
I'd certainly love to hear how one would do that. I was going to go to a 30k/year under grad college but couldn't due to not being able to get a loan that could cover the costs. I could only get a couple grand a year from the government so I didn't go.
Grad students can take 20,500 a year and Medical Students can take 40,500 a year on just Stafford Loans.
http://www.finaid.org/loans/studentloan.phtml
Is this the result of the lefts attack on profit margin in this country? People who stupidly believe profit is the reason for every price increase?
Gee lets think about this for a moment. A finite resource that will have an increased demand. Why, it has to be because of profit margin the price of education keeps going up!
Is this a result of the right's defense of corporate welfare in this country? (see how we can both do that?) Can you possibly explain why having the government give banks money to give to people for it is better than giving the loans directly?
Thump553
Lifer
- Jun 2, 2000
- 12,839
- 2,625
- 136
The thread title is grossly misleading. This bill does not have the government taking over ALL student loans, private lenders will still be free to offer student loans if they wish. What the bill does is eliminate a wasteful government subsidy to certain "private" businesses in that government propping up of commercial student loans is being eliminated. Rather than waste tax dollars on subsidies to these lenders, the government money will be going all to student loans.
I see it as a win-win situation regardless of your political bent. The only way government subsidizing commercial loans would be cheaper overall would be if private lenders' costs plus their profit margins are less than governmental costs in administering the same loan programs. Extremely doubtful.
I see it as a win-win situation regardless of your political bent. The only way government subsidizing commercial loans would be cheaper overall would be if private lenders' costs plus their profit margins are less than governmental costs in administering the same loan programs. Extremely doubtful.
I worked in a student loan department at a bank when Direct Lending by the government was first implemented years ago. Maybe some information has changed since then, but probably not by much.
Let's combat some FUD.
1. Government sets the interest rates on subsidized and unsubsidized Stafford loans. The bank does not set the rate. The banks do set the rate on non-government loans.
2. Maintenance of student loans is done by lenders or their assignees. For example, if a student moves, somebody has to process the change of address. If the borrower misses a payment, certain government-mandated due diligence must be performed (e.g. letters, phone calls). If the government cuts off private lending, government will have to grow in order to continue this loan maintenance. Private lenders will have to cut jobs as well.
3. Government did not borrow money and give it to private lenders to loan out. Private lenders had to use their "own" money to make student loans. Government did give money (the interest for SUBSIDIZED student loans) to private lenders.
4. The entire point of government-guaranteed student loans was to make higher education available to low-income/middle-income families. ANY student loan is an uncollateralized loan. Any uncollaterized loan is riskier than a loan with collateral. A riskier loan is a more expensive loan.
5. If the bill passes, Government will have to directly fund Stafford loans. That means that government will have to come up with the cash to fund all these loans. No big deal until you remember that the government is paying interest on its own debt already. So now the government wants to pay interest on an extra $74 billion dollars per year. Did the CBO include this cost in their cost-savings estimate?
My comments:
Summary: Increase government, shrink private industry, increase reliance on government.
I suspect that one of the main cost-savings associated with this bill would be the elimination of the "subsidized" interest being paid to private industry. That amount is the only "free" money being given to private lenders. I wonder how much it actually is?
The amount of work required (loan origination and maintenance) does not decrease. Either government will have to do it itself, or contract it out. Either way, I do not have faith that government can do this more efficiently/cheaply than the current system.
By the way, when Direct Lending first started, the government swore that it wasn't going to cut private lenders out of the student loan industry. Nope, no slippery slope here. TRUST YOUR GOVERNMENT!
Let's combat some FUD.
1. Government sets the interest rates on subsidized and unsubsidized Stafford loans. The bank does not set the rate. The banks do set the rate on non-government loans.
2. Maintenance of student loans is done by lenders or their assignees. For example, if a student moves, somebody has to process the change of address. If the borrower misses a payment, certain government-mandated due diligence must be performed (e.g. letters, phone calls). If the government cuts off private lending, government will have to grow in order to continue this loan maintenance. Private lenders will have to cut jobs as well.
3. Government did not borrow money and give it to private lenders to loan out. Private lenders had to use their "own" money to make student loans. Government did give money (the interest for SUBSIDIZED student loans) to private lenders.
4. The entire point of government-guaranteed student loans was to make higher education available to low-income/middle-income families. ANY student loan is an uncollateralized loan. Any uncollaterized loan is riskier than a loan with collateral. A riskier loan is a more expensive loan.
5. If the bill passes, Government will have to directly fund Stafford loans. That means that government will have to come up with the cash to fund all these loans. No big deal until you remember that the government is paying interest on its own debt already. So now the government wants to pay interest on an extra $74 billion dollars per year. Did the CBO include this cost in their cost-savings estimate?
My comments:
Summary: Increase government, shrink private industry, increase reliance on government.
I suspect that one of the main cost-savings associated with this bill would be the elimination of the "subsidized" interest being paid to private industry. That amount is the only "free" money being given to private lenders. I wonder how much it actually is?
The amount of work required (loan origination and maintenance) does not decrease. Either government will have to do it itself, or contract it out. Either way, I do not have faith that government can do this more efficiently/cheaply than the current system.
By the way, when Direct Lending first started, the government swore that it wasn't going to cut private lenders out of the student loan industry. Nope, no slippery slope here. TRUST YOUR GOVERNMENT!
Everyone deserves to be compensated for their contributions to society. This especially includes those services in health care and education, which, as you pointed out, are critical to our continued function as a nation.
Interest at 2% (on top of inflation) would be nice.
- Aug 22, 2001
- 32,368
- 33,289
- 146
When I first read Americans were expatriating themselves over student loans I could not believe it.
Since the government can always borrow more cheaply than banks, the fact that the government is using its money instead of the bank's money is irrelevant. (in fact is a source of additional savings)
So yes, the government will have to hire more people to handle this. I really fail to see why it's a growth of government though, considering the banks were merely acting as subcontractors for the government anyway.
Banks were able to give loans to people using the explicit backing of the government at zero risk to themselves, it's the very definition of corporate welfare. It's as much a 'shrinking of private industry' as cutting the welfare rolls would be considered cutting private employment.
I think the impacts limited just to the initial few years & the cash outflows for direct funding the loans. Over the life of the loans, gov't will come out ahead & make a profit as they start to collect 6.5% on money they borrowed @ 2-4%.
Please explain, because this makes no sense to me at all. The government can borrow more cheaply than banks, but the interest paid by the government is directly passed on to the taxpayer, whereas the interest paid by a bank is not. How is this a cost savings to you and me?
"Subcontractor" <> government. Government does not have the same incentives to be efficient as private business.
Regardless of one's opinion of the current system, it is true that, if passed, this bill WILL cause private lenders to cut staff. That is, by definition, a shrinking of private industry. There will be a consequent increase in government staff to compensate. That is, by definition, growing government.
In hard economic times, shrinking private industry and growing government has a pretty bad track record for encouraging growth.
By the way, there is some risk involved in student loans, but I won't go into that here because it's beyond the scope of this discussion.
Shrinking private industry and growing government has a bad track record for encouraging growth in hard economic times? On what are you basing this?
About the whole 'growth of government' thing, again I don't view the government giving out welfare checks to the banks as 'private industry'. It's corporate welfare and nothing more. I do not consider a segment of business for a bank dependant upon government handouts to be 'private industry'.
As far as a 'cost savings' goes, the government is able to borrow at a much lower rate than private industry, and the costs of interest either to banks or to the government is felt throughout our economy either way. (why wouldn't it be?) Considering the scope of student loans, a few points is a huge amount of money. Cutting out the welfare check to the middle man is simply more efficient, and so we should have done this a long time ago.
So...you can't refute any of my points, and you want bigger government. Okay.
Back to the question I asked previously but no one answered - Did the CBO take into account the interest that will have to be paid on loaning out $74 billion per year? Keep in mind, that until graduates start paying the money back, that's $74 billion + $74 billion + $74 billion, accumulating over years. In four years, the typical length of an undergraduate curriculum, that adds up to $296,000,000,000. Of course, that's just a ballpark number since some students will begin repayment in less than four years (and more new students will need money), but that's still a lot of interest to be paid.
I am not arguing that the student loan program is not a form of corporate welfare. I am questioning the supposed cost savings that this bill is claiming, the increase in government size, and the contraction of private business.
Gov't borrows money at 2-4%. Loans it out at 6.5%. They'll end up making a profit and there won't be an impact to taxpayers in the long run. The first few years will be a different story though.
As for the shrinking industry, the fact that an industry exists does not justify its existence. What value-add do the private lenders add to the equation? It seems to be just the loan origination services since they're still planning to contract out the servicing.
Now that I think about it, it sounds a little like the public works program back during the depression, which I somewhat agree with. The govt is paying out $ essentially to keep people employed.
The government can not even keep track of people on a student visa. Why do you think congress makes a good bank?
What points did you make? An unfounded statement that in hard economic times government is inferior to private industry? (despite huge counter examples such as the Depression) That interest paid by the government impacts us all, but interest paid by a nation spanning banking system does not? (hint: it does) I didn't really see many points other than your speculation to refute, and the burden of proof is on you to show that your statements are correct, not for me to refute whatever you make up.
As for 'wanting bigger government', who cares? I want the most efficient possible system. (shouldn't we all?) If it's private, great. If it's government, great. It appears from nonpartisan research services that the government system is more efficient. Unless you can provide evidence to the contrary outside of your personal opinion, what's there to argue about?
Finally, you are complaining about the contraction of private business that was based on government welfare payments. I guess I just don't see this as a problem at all, in fact I see it as yet another large plus. Government spending to prop up business is a smart short term solution to economic problems, but it's hardly a good basis for an industry. I think banks have had quite enough welfare for my liking.
That statement wasn't really the important part of my post, I just thought yours was unnecessary. Can you tell me why having the banks as the middle men would be superior in this case?
Keeps the politicians hands out of the mix for starters. When a politician has any ability to influence a monetary transaction. You can bet what is best for the market and the nation as a whole is not what policy will be enacted. What is best for the politicians short term election hopes is what will pass.
What is your logical thought process on this? Nationalize all the banks? Why do we need a middle man at all? Just have the fed lend directly to the population cutting out the banks?
I amend my previous post btw.
Both left and right in this country have been conducting quite the campaign of welfare for big business.
Part of the problem here is the market. The market would set student loan interests ridiculously high in the double digits. Maybe best for the market, but not really for the nation. The gov't stepped in to collateralize the loans and set the rates at an affordable level. Without which, most people wouldn't be able to afford college.
The issue here isn't the free market. It already isn't free when the gov't backstops your loans & sets the interest rates on them. The question really is how much of a benefit is there in having this industry and does it make sense for the gov't to conduct the loans directly.
The student loan situation is a lot different than a normal loan. The basic idea with student loans is that the banks lend money to you for school, and the government guarantees their loan against loss and guarantees them a certain interest rate for profit. It's not like normal lending at all.
I'm not trying to nationalize anything, it just seems silly for me for the government to lend money to banks to begin with, then guarantee when they lend that money they will make a predetermined profit. They are basically acting like employees of the government, just really really expensive ones.
TRENDING THREADS
-
Discussion Zen 5 Speculation (EPYC Turin and Strix Point/Granite Ridge - Ryzen 9000)- Started by DisEnchantment
- Replies: 25K
-
Discussion Intel Meteor, Arrow, Lunar & Panther Lakes + WCL Discussion Threads
- Started by Tigerick
- Replies: 24K
-
Discussion Intel current and future Lakes & Rapids thread- Started by TheF34RChannel
- Replies: 23K
-
-
Facebook
Twitter