The Student Loan Bailout

The Department of Education is bestowing capital onto student lenders at the rate of as much as $500 million per week! to keep the subsidized student loan program afloat in the wake of the credit crunch. It would be cheaper and simpler if they cut out the middleman and simply expanded the direct loan program, where students get funds directly from the Treasury. In fact, as lenders bow out and leave them in the lurch, schools are flocking to direct lending. The only group that misses out if we switch to direct lending altogether is the remaining middleman lenders, like Sallie Mae and Citibank. They would lose their fat subsidies and guarantees.