Sunday, March 28, 2010

Changes to Student Loans

Something that went relatively unnoticed (untiland whatnot recently) amidst all the healthcare news lately are the changes made to student loans.  It's absolutely ridiculous how some people are so up in arms about this, screaming about another "government takeover" that's killing freedom and whatnot.  Oddly enough, this one actually is a government takeover, but one that I think most people should be happy about!

Basically, until this new law the government was lending money to private lenders so they could lend money to students, while the government (AKA: taxpayers) assumed all of the risk.  This meant that private lenders were able to make profits off of the interest they charged on student loans without having to worry about whether or not the student would actually pay the full amount back.  If the student failed to do so, no problem, the government would pay the private lender instead!  Talk about a government handout!

Now, yes, I'm sure jobs will be lost due to this legislation.  That's not a very popular thing to do, but in the scheme of things, those jobs are incredibly unnecessary anyway!  When you cut out the middleman like this, the middleman loses a job, but you also save boatloads of money (to the tune of $61 billion over 10 years in this case).  That's about the same amount as tort reform would save, so this isn't something that's going to combat the deficit by any means, but it does let us get scholarship and loan money to more people who need it.  I was fortunate enough to get through undergrad with zero debt because I had an academic scholarship for tuition and I worked 25-30 hours per week to pay for everything else.  But there are other people who would do very well in college but who didn't reach their full potential in high school, so they aren't going to get academic scholarships.

The bottom line is that the government actually cut some very wasteful spending and a lot of students are going to benefit from it.  In the short term, yes, several thousand jobs are going to be lost, but I don't think that's sufficient reason to dismiss an opportunity to save billions of dollars while better serving the financial and academic needs of millions of college students.

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