Interest rate subsidies help students and banks. Also, where's the money coming from? From lenders, i.e. people's bank accounts. > It transfers wealth from ba

Interest rate subsidies help students and banks. Also, where's the money coming from? From lenders, i.e. people's bank accounts. > It transfers wealth from banks to the government to the benefit of taxpayers No, it transfers money from lenders (like you and me who have bank accounts) to borrowers. People own banks and lend money to banks. Banks don't have any magical stash of money. If banks lose wealth, then I lose wealth (my bank account earns less real interest). > You're also assuming lenders have control over that given the way the government creating money affects interest rates. When the government creates money it has the effect of reducing the amount of government debt in circulation (they have money, they don't need to issue bonds), which reduces interest rates on bonds and forces would-be bond purchasers into buying some other debt, which increases competition for lending and reduces interest rates in other lending markets too. Yes, the government will loan less, but interest rates will go up (right now they're a low 2-3%) to adjust for the risk of inflation which cancels that affect. Lenders have control over interest rates obviously; only they buy bonds. Infact, if the inflation is a surprise, then lenders will be risk-averse causing drastic increase in interest rates (they'll be thinking "what if the government inflates money even more next time in a surprise?"). Lenders like stability.