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Saturday, August 18, 2007

Student Loans

Here is a good article on student loans in the New Yorker.

Basically how it works is the idea is to make college affordable by offering low interest loans to students. But loan companies don't want to offer low interest loans to people with no collateral and uncertain future wealth. So the government offers incentives to the loan companies by doing two things; guaranteeing the loans and providing subsidies to the loan companies.

Now the loan companies are getting rich. Sallie Mae made $1.3 billion last year. The government can actually issue the loans themselves for cheaper than the current program. But, government control of programs is bad, right? What this article points out is the government is already controlling this program, but through the involvement of private companies it is not economical.

BTW, we paid off my student loan this year! One down, one to go!

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