Student Loan Bill
6th September 2007
Read it. And come, let us plod:
- The reason interest rates are what they are is because that’s the market-determined rate of risk for such loans, as determined by a lot of very highly-educated people (and computer programs) whose jobs depend on their being right about this sort of stuff.
- The way the government “halves interest rates” is by extending enough full-faith-and-credit-of-every-poor-sap-taxpayer guarantees to reduce the risk, which is reflected in the interest rate.
- The result of this is that people get loans who ordinarily wouldn’t, because they are too much of a risk.
- This means that, on down the line, these people default on the loans, which the government (i.e. YOU), because of the guarantees, has to pay for.
Which makes this statement…
Democrats described the legislation as costless to taxpayers, saying the rate cuts would be offset by a reduction of nearly $21 billion in subsidies paid by the government to lenders in the federal loan program.
… a rather obvious bald-faced lie; to the extent that it brings the rate of interest below the free-market rate, it will actually increase the amount of subsidies paid by the government to lenders in the federal loan program. But not for a couple of decades, by which time the Democrats in question will be safely retired with their cushy government pensions and countless bridges and roads named after Senator/Congressman Porkbelly.