Interesting thought experiment. If not accompanied by a crackdown on lending it would probably lead to *more* borrowing. It would increase federal debt, but act as a big stimulus, and free young people up to switch careers and take more risks.https://twitter.com/mingus_coleman/status/1053383719388635136 …
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There's a distinction between a private student loan and federal aid, but the servicers are private institutions.
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You mean the govt. contracts private companies to process payments? Sure. But the loans are all owned by the govt., not by private institutions.
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Right, it's a middleman industry that adds no real value and as the regulations weaken, become more and more predatory. There's no reason the gov't can't process directly. There's likely a way to do it much more simply through the IRS - assuming they were staffed and funded.
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But the interest you pay on loans doesn't go to the middleman, it goes to the govt. Direct govt. processing of loans would do zero to decrease the burden of student loan repayment.
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So, why are those businesses profitable, then?
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A) Their profits are a trivial amount of the burden of student loan repayment. B) If govt. costs exceeded third-party provider costs, it's possible direct processing would increase repayment costs. C) Processing fees are a total and utter red herring in this debate!!
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I would say: 1) Administrative costs are always relevant, even if they don't solve the problem in this case 2) Servicers can be predatory. Obama added rules to restrict some of that, now it's starting up again. 3) Cost of forgiving high, I think a decent option is no intrst
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The mental gymnastics required to pin the student loan crisis on third-party processing companies are just SPECTACULAR here. It's like watching a contortionist.
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Is this still true? Borrowers with good credit can get a much better deal on the private market.
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