Government takes over all student loans

[b0mbrman]

Originally posted by: tk149

Originally posted by: eskimospy

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)

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?

For this to be relevant, you would have to assume that the student loan industry produces a net loss

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.

"Subcontractor" <> government. Government does not have the same incentives to be efficient as private business.

...and private business does not have the same incentives to serve their customers

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.

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.

It's shrinking (more accurately, returning to parity) a private industry that was artificially inflated through government subsidy to start with.

 

[b0mbrman]

Originally posted by: tk149

Originally posted by: eskimospy

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.

I'll check on the CBO report in the morning.

However, do you think that the loan servicers would have spent so much money and time lobbying to kill this if they thought that servicing these loans would make them lose money?