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1 and 2 would happen but 3 would necessitate a decision to consciously subsidize the banks since it can just issue treasury bills itself at a much lower interes
by crdoconnor 10y ago
1 and 2 would happen but 3 would necessitate a decision to consciously subsidize the banks since it can just issue treasury bills itself at a much lower interest rate.
- rahimnathwani 10y agoYou're forgetting about the other major costs: default risk and loan servicing. Sure, the government might save an amount equal to banks' net profits on student loans, but that could be outweighed by the servicing costs, as the government would need to build a loan servicing operation (and build or install associated software) from scratch.