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[Lord Dakoth]

(You can read the article <a href="http://online.wsj.com/article/SB125321217589620383.html#articleTabs_comments%26articleTabs%3Darticle>here[/url].)

Just a few hours ago, the U.S. House of Representatives voted to disallow private entities from giving student loans.

As mentioned in the article, the government will essentially be the "sole provider of college loans."

Good thing? Bad thing? Why?
Discuss.

Now, my personal view.I am disgusted that the government would pass such a law.

Removing private lenders from the market will severely curtail the amount of money available for students to borrow.

What does this mean? Fewer people will be able to go to college. Which means that there will have to be some way to choose who gets to take student loans. I'm betting that the friends and family of the "federal student loans board" members will get priority.

If I am a student, and I want to go to college, and there is someone who would very much like to lend me money, why shouldn't it happen?

What gives the government the right to say that this transaction cannot take place?

[redacted123]

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[Duke 2.0]

 Know there is a lot of drama over the Healthcare thing, so I'm not surprised this was slipped under the noses of everybody involved with that affair.

 And yeah, closing down options isn't a cool move when it comes to education.

[Leafsnail]

It's one thing for the government to help people by providing loans to students who really need it, but it's quite another for them to force out all competitors...

[Fishersalwaysdie]

Why do all these freedom-loving people who are paranoid about the evil government vote for more state control?

[sonerohi]

You realize that all you have to do still is 'give a gift' to the loan taker and then have an agreement that it will be paid back eventually, without telling the government all about it. I mean holy shit, it's like someone telling you that you can't leave a box somewhere for a friend to pick it up later. Just go give him the box in person.

[bjlong]

Problem is, it's not just friend-to-friend loans. It's loans between students and private institutions, like Wachovia.

This should be shot down, right now. The gov't does not have the means to support all these students.

[Zangi]

Its only good if the government can and will provide a lot more loans then they currently do now.

Its bad, if they keep the criteria as they do now or lower the requirements for loans too little.

You realize that all you have to do still is 'give a gift' to the loan taker and then have an agreement that it will be paid back eventually, without telling the government all about it. I mean holy shit, it's like someone telling you that you can't leave a box somewhere for a friend to pick it up later. Just go give him the box in person.

And yea, private companies can loan that way... but, they won't have as much legal power if the person defaults or just outright doesn't pay it back.
Not good business sense.

Friend-to-friend loans still work the same.  Its not even an issue.

[Aqizzar]

Without saying one way or the other whether I think this idea is "good" or not, I have to ask.  What makes you think the government won't provide the same amount of liquidity to pick up the slack?  I'm not saying it will, I just get irritated by people who reflexively say "oh the government's more involved so it's going to always suck forever now".

What I want to know is, how in the world would anyone intend to enforce this?  Forget friend-to-friend loans, plain old banks will still make loans just fine.  The government can't say that you can't spend any money you have on education-related expenses, so now you'll just have to get a general, non-specific loan and pay out-of-pocket with the money.

All that being said, I'm still trying to figure out why so many people don't want the government sticking it's foot in the banking industry.  Didn't the last two years teach us that you can't trust Wachovia (which doesn't really exist anymore) more than Congress?

[Duke 2.0]

 It is generally a bad idea when there is only one course of a service. Although I agree about how the government is gonna regulate this, the additional loan that is identical to student loans but can only be applied to students without being a student loan would be a pain to set up.

[Aqizzar]

Looking a bit deeper (i.e. going to sources other than the Wall Street Journal) it turns out this is more of a restructuring than a "take over".  The way it has worked is that the Federal Treasury subsidized banks that made student loans, to insure them against defaults (making lending to students more financially attractive by reducing the risk).  However, lo and behold there's tons of graft and inefficiency in that system, so the new vote is to cease that subsidizing and instead invest that fund directly into student financial assistance.  Or something to that effect.

Where it becomes a "take over" is that the government would manage and make the student loans, and private banks would then buy into and insure the system the way all federal bonds do.  Or something to that effect again.  I'm hardly an expert on this stuff, but as usual it's far more innocuous than it first appears.

[bjlong]

The reason I remain skeptical is simply that the government taking away x service, pointing to its replacement service y, generally insures that service y is going to suck. Usually keeping services around means that people go with the service that works the best. I understand that's not all that's going on here, but when your education is on the line, you tend to be kind of conservative. >_>

[Lord Dakoth]

when your education is on the line, you tend to be kind of conservative. >_>

No kidding.

Look at how the government handles U.S. public schools now, I believe that they are failing miserably? Do they honestly think that they can handle paying for college education, if they can't provide halfway decent high school education?

[Aqizzar]

Look at how the government handles U.S. public schools now, I believe that they are failing miserably? Do they honestly think that they can handle paying for college education, if they can't provide halfway decent high school education?

You do realize that high schools are all but exclusively the responsibility of state and local governments right?  That the federal government manages phys-ed standards and essentially nothing else?

[Lord Dakoth]

Look at how the government handles U.S. public schools now, I believe that they are failing miserably? Do they honestly think that they can handle paying for college education, if they can't provide halfway decent high school education?

You do realize that high schools are all but exclusively the responsibility of state and local governments right?  That the federal government manages phys-ed standards and essentially nothing else?

True, but I mean government in general, not exclusively the federal government.
Bureaucracy seems to me to impair efficiency in almost every case.