"Politicians subsidize the purchase of a good or service, prices inevitably rise in response to this pumped-up demand, and then the pols blame the provider of the good or service for responding to the incentives the politicians created. Think housing finance and medical care."
...
"We've got a crisis in terms of college affordability and student debt," said Mr. Obama, without a trace of irony at the State University of New York at Buffalo. The same man who three years ago forced through a plan to add $1 trillion in student loans to the federal balance sheet over a decade said on Thursday, "Our economy can't afford the trillion dollars in outstanding student loan debt."
Adding "$1 trillion in student loans to the federal balance sheet over a decade" is a result of direct lending, ie cutting out the middleman. It is also saving the taxpayer money to the tune of $70B over ten years.
It doesn't save the taxpayers any money if the government makes foolish loans that can't be repaid that nobody would have ever lent out if their own money was on the hook instead, nor does it save the taxpayers any money if the government provides easy, free money that causes unnaturally skyrocketing tuition followed by an unnatural higher ed crash.
An awfully expensive $70B over ten years, I think.
The savings of $70B comes from eliminating a profit layer that was enjoyed by the banks.
The government insured the loans before and after the change in 2010. So the taxpayer was on the hook for losses. Now it is still on the hook for losses, but also benefits from profits.
The $70B is simply from cutting out the middleman.
A profit layer that also prevented those other things from happening. These things can not be considered in isolation. People are more careful with their own money than the free money the government provides. We prevented the eeeeeviiil profit mongering bank bastards from making money, at the cost of encumbering millions upon millions with debt, and who knows what damage we're going to witness to the higher ed system over the next few years.
Will it have been worth all this damage to prevent the eeeeeeviiiiil profiters? It really already wasn't, and the accounting for the evil of our current policy is only going to get worse.
Basically we are publicly subsidizing education. Will it be worth it? Well, history has shown education to be a better investment than subsidizing the risks of private institutions. I'm betting it will be.
We wouldn't behaving this discussion if we had not created a situation via government meddling in which education is frequently not a good investment.
Don't deal in the fuzzy-wuzzies of how wonderful education is in a perfect world. Deal with the world in front of you, the one on the news, the one generating a trillion dollars in crushing debt on those least able to pay it back. People are exploiting your willingness to hide in glib, pretty generalities.
I think the headline here implies that the said middleman is unsure about the viability of the market, so any savings figure is dependent on low loan default figure.
No, JP Morgan is NOT a middleman. These were cut out in 2010, and JP Morgan is lending directly now. Their loans are not subsidized nor backed by taxpayer money, and they are free to decide to stop lending, which is what appears to be happening now.
It also means that the government is now
1) the one making the laws
2) the organisation that would suffer if the assumptions ("guaranteed repayment") turn out less than perfect
So now we have : debt slavery where your debtor is actually the one making laws. This could be really good or really bad. Really good if it is decided that transferring the education debt to all taxpayers is deemed acceptable, really bad if the government gets into the business of debt collection from people with no assets (ie. actual slavery).
You do realize that the vast majority of slaves in, for example, the Roman republic were slaves by choice, right ?
Maybe there was a lack of alternatives available to them, or at the very least they didn't themselves believed other good alternatives existed (the same as with student loans), but it still required them to agree to it.
http://online.wsj.com/article/SB1000142412788732416520457902...?
"Politicians subsidize the purchase of a good or service, prices inevitably rise in response to this pumped-up demand, and then the pols blame the provider of the good or service for responding to the incentives the politicians created. Think housing finance and medical care."
...
"We've got a crisis in terms of college affordability and student debt," said Mr. Obama, without a trace of irony at the State University of New York at Buffalo. The same man who three years ago forced through a plan to add $1 trillion in student loans to the federal balance sheet over a decade said on Thursday, "Our economy can't afford the trillion dollars in outstanding student loan debt."