To describe the subsidy policy fully, there's on-demand immediate guaranteed federal reimbursement of 97+% of the loan's entire projected value. The DOE brags a

To describe the subsidy policy fully, there's on-demand immediate guaranteed federal reimbursement of 97+% of the loan's entire projected value. The DOE brags at the top of its annual letter about the $120+ billion in new loans issued under the policy every year. It's no wonder after many decades of this that colleges are bloated with non-educational excess and tuitions have risen exponentially. Prospective students are not shopping with real prices in mind - if there is a choice between a university with big names, shiny amenities, and attractive dorms the sticker price difference doesn't mean much. Gradually, all schools give up their frugality and delude themselves into mission drift. Arbitrarily cancelling loans now without scaling down new loans is multiplying the subsidy distortion effect, as new borrowers are increasingly convinced they too may not have to pay back the loans they're freely given. In my opinion, subsidized loans need to stop entirely for a period of back-to-essentials relative austerity for university budgets before we bail out and calcify the current bloat with a new benefit. Then if we really need a new benefit it can look like a leaner amount-capped voucher and not a state inflated debt balance that may or may not go away. The voucher could scale on merit, a guaranteed partial scholarship as long as you meet certain standardized test/grade levels (without the need to apply and be chosen amongst a limited pool).