The Evolution of the Student Loan
According to a recent article in the Wall Street Journal many colleges seem to be turning away from private lenders. Instead they are considering the offerings of a government program for student loans. It can be noted that several private lenders will work within the Federal Family Education Loan program in order to guarantee the loans that are given to students. The loan default rate is about five percent however, because of special programs that teach our youth financial responsibility some private loan companies have a default rate as low as two percent.
The student loan industry is well over a hundred billion dollar per year. Now due to increased tuition costs it will only continue to grow as an industry and this has caused the government to consider doing loans directly which could possibly cause problems for students caught in the middle during the term of their loan or in the middle of a school year. The government wishes to make these loans directly available to students and can be compared to the health care industry. The Small Business Administration loans small businesses money but they do not do it directly and it seems to work perfectly fine. Even with higher risk loans. The concern would be that the system would be taken advantage of and schools would raise tuition, not lower it, while making acceptance into college easier so that the college can grow, and using the taxpayers’ money.
