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Who is the "they" here? Unless the govt. is doing it, it doesn't count as subsidy. Also, I thought govt. loans were much smaller in total than private loans. I

Who is the "they" here? Unless the govt. is doing it, it doesn't count as subsidy. Also, I thought govt. loans were much smaller in total than private loans. Is that incorrect?

gnaritas 14y ago
The government made student loan debt not dischargable through bankruptcy; that's basically a loan guarantee, hence a subsidy.
- rprospero 14y ago
  Except the government doesn't guarantee that they'll pay it off; they're just forcing it onto the student. To put it differently, if the government announced that failed startups could not discharge their debt through bankruptcy and that the founders would be held responsible for paying off the debts, would you call this government subsidization of small business?
  - gnaritas 14y ago
    Yes, it would encourage banks to start lending because they have you for the rest of your life to force you to pay. Those kids get loans they couldn't otherwise get because banks know they have them by the balls.
    - luser001 14y ago
      But I wouldn't use the word 'subsidy' to describe that situation.
      - gnaritas 14y ago
        Maybe you wouldn't, but many people would. The government is encouraging behavior with law and giving the banks something that drastically lowers the risk of lending; that something is guaranteed access to a persons future earnings. I call that a subsidy, even if it's not a direct cash payment.
  - JumpCrisscross 14y ago
    Yes, they do. Just as Fannie Mae and Freddie Mac guaranteed "qualifying" loans the government guarantees some portion of student loans, e.g. Stafford loans, through Sallie Mae.
liber8 14y ago
Yes, the government massively subsidizes student loans, both directly, and through guaranties. See http://www.direct.ed.gov/ http://www.direct.ed.gov/
luser001 14y ago
Ok, I got downvotes instead of clarifications to my question about the market share of the govt. in student loans. :( It appears that the direct and indirect (i.e., backed by the govt.) loans by the federal govt. account for 80% of the market. So yes, the relaxed standards for govt. backed loans is keeping college costs high. And the word 'subsidy' can be reasonably applied to the current situation. http://online.wsj.com/article/SB10001424052970203440104574405154157021052.html http://online.wsj.com/article/SB1000142405297020344010457440...

Who is the "they" here? Unless the govt. is doing it, it doesn't count as subsidy. Also, I thought govt. loans were much smaller in total than private loans. Is that incorrect?

gnaritas 14y ago

The government made student loan debt not dischargable through bankruptcy; that's basically a loan guarantee, hence a subsidy.

rprospero 14y ago
Except the government doesn't guarantee that they'll pay it off; they're just forcing it onto the student. To put it differently, if the government announced that failed startups could not discharge their debt through bankruptcy and that the founders would be held responsible for paying off the debts, would you call this government subsidization of small business?
- gnaritas 14y ago
  Yes, it would encourage banks to start lending because they have you for the rest of your life to force you to pay. Those kids get loans they couldn't otherwise get because banks know they have them by the balls.
  - luser001 14y ago
    But I wouldn't use the word 'subsidy' to describe that situation.
    - gnaritas 14y ago
      Maybe you wouldn't, but many people would. The government is encouraging behavior with law and giving the banks something that drastically lowers the risk of lending; that something is guaranteed access to a persons future earnings. I call that a subsidy, even if it's not a direct cash payment.
- JumpCrisscross 14y ago
  Yes, they do. Just as Fannie Mae and Freddie Mac guaranteed "qualifying" loans the government guarantees some portion of student loans, e.g. Stafford loans, through Sallie Mae.

liber8 14y ago

Yes, the government massively subsidizes student loans, both directly, and through guaranties. See http://www.direct.ed.gov/ http://www.direct.ed.gov/

luser001 14y ago

Ok, I got downvotes instead of clarifications to my question about the market share of the govt. in student loans. :( It appears that the direct and indirect (i.e., backed by the govt.) loans by the federal govt. account for 80% of the market. So yes, the relaxed standards for govt. backed loans is keeping college costs high. And the word 'subsidy' can be reasonably applied to the current situation. http://online.wsj.com/article/SB10001424052970203440104574405154157021052.html http://online.wsj.com/article/SB1000142405297020344010457440...