Monday, September 17, 2007

"How banks rip off college students and the government."

The founding editor of Slate authored a solid, if slightly rushed-sounding piece on a topic readers of this blog know well.

Here's my favorite bit:
The student loan "industry," as it is comically referred to in the newspapers, is an interesting case study in politics and business. To start, it is hardly an industry. There are no factories. The only things it "makes" are loans. Furthermore, it exists only because of a government program.

Also good:
Yet in the four decades since the federal government started it, the student loan business has evolved into a pretty good imitation of an industry, with trade associations, lobbyists, and support from politicians, mostly Republican. This "industry" is so dependent on the good will of politicians, in fact, that the reform bill alone may be enough to queer the deal in which its biggest player, Sallie Mae, is supposed to be bought by a private-equity firm for $25 billion...

There is very little about the student loan program that has anything to do with free-market capitalism. Yet whenever the student loan system comes under criticism, lobbyists, "industry" leaders, and supportive politicians haul out the same old clich├ęs as if they were defending Adam Smith's famous pin factory itself.

1 comment:

Anonymous said...

My fiance just graduated from college and she accrued quite a bit of federal/private student loans. Her most recent interest rate on the private was a whoppping 9.25% and I am looking around places trying to get a lower interest rate to consolidate to. Does anyone have any suggestions of places to go?