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Interest rates not reflecting the creditworthiness of the borrower is a design feature of federal loans. The idea being the government should at least subsidize
by sidewndr46 2y ago
Interest rates not reflecting the creditworthiness of the borrower is a design feature of federal loans. The idea being the government should at least subsidize loaning money to people for education.
In practice it just allows universities to raise tuition to the moon.
- ethbr1 2y agoExactly. Equality of opportunity, to the extent achievable, is important to preserve. But it needs to be done in a way that universities don't simply absorb any funding by raising tuition. IMHO, we should start by taking the ACA approach on admin overhead. I.e. If you want federal loans/grants to be usable on tuition at your institution, here's the administrative cost ("funds not directly spent on teaching") cap. If you exceed that, then you must rebate students the overage.
- johnnyanmac 2y ago>But it needs to be done in a way that universities don't simply absorb any funding by raising tuition. Again, who's going to stop them? The government? No one in power has the incentive to change the system. And they wont until it's too late.
- ethbr1 2y agoThe federal and state governments, as primary funders, certainly have the power to stop them. And the incentive, to the extent funding goes to private institutions.