Monday, March 29, 2010

FFEL's Dead, Time to Work on DL

by Andrew Gillen

With half of my master plan to overhaul student loans now accomplished, it’s time to start attacking DL.

The first shot comes courtesy of The Economist telling us a bit about the UK system. The UK has had a version of the DL program for years. How’s that working out?
Those who borrow from the government to pay tuition fees need repay the loan only after they graduate and start earning steady money. Even then, interest-rate subsidies make their loans a drain on the public finances. So the government caps student numbers and fines any university that recruits too many…
We can expect politicians here to continue to try to buy votes with interest rate subsidies, loan forgiveness programs, and loan payment plans for public employees and other favored groups. So it is highly likely that DL will morph into a drain on the public purse in the US just like it is in the UK. When that happens, will we be forced to impose enrollment caps too? It seems unlikely, but then again, so did the idea of turning the federal government into a loan shark, and that didn’t stop us, so who knows.

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