2 ms·
I had the same thought. My hunch is that the difference is friction. In both cases, there's money going from the Feds to the University (100% probability) and m
by chemag 6y ago
I had the same thought. My hunch is that the difference is friction. In both cases, there's money going from the Feds to the University (100% probability) and money going from the student to the Feds (<100% prob).
<1993: there's a bank in the middle. If the student cannot pay, the bank has to do the paperwork to get paid by the Feds. Note that the profit for the bank is limited.
>1993: no bank in the middle. University gets paid right away. Zero risk for them
- mixmastamyk 6y agoYes, presumably Uncle Sam cares less about making a sound loan in the first place. It is also able to create money out of thin air—in other words, (symbolically) infinite resources. Getting paid upfront, instead of years later after tons of paperwork, can only accelerate the process.