by Andrew Gillen
I’m hoping that the people who are against the looming Direct Loan monopoly in student loans can implement the idea below. As I’ve noted several times, most of the savings from switching to DL comes from turning the federal government into a loan shark. The bulk of the savings come from borrowing money at very low interest rates and then lending it to students at higher rates.
That business model (borrowing cheaply, lending more expensively) will generate the same savings in any lending market. If someone in Congress were to get the CBO to issue a comparable analysis for say the mortgage, auto, or the commercial lending market, the CBO, using the same methodology and assumptions as they did for student loans, will report massive “savings” if the government took over any of these.
This would put the pro-DL folk in a pickle. They could either come out in favor of having the federal government become the only lender in every single lending market, explain in tedious detail why student loans are somehow different (I don’t see how), or come up with a new rationale for imposing a DL monopoly.