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The government made student loan debt not dischargable through bankruptcy; that's basically a loan guarantee, hence a subsidy.
by gnaritas 15y ago
The government made student loan debt not dischargable through bankruptcy; that's basically a loan guarantee, hence a subsidy.
- rprospero 15y agoExcept 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 15y agoYes, 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 15y agoBut I wouldn't use the word 'subsidy' to describe that situation.
- gnaritas 15y agoMaybe 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 15y agoYes, 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.