<p>540 billion dollars is not residing in bonds, in guarantees or in lenders pockets. It went to pay college tuition. It was invested in the post secondary education of millions of students. Investment in education is a good thing. An educated work force produces the middle class and it’s how all those cars, computers, and homes get produced and purchased. And if you think other countries have a higher standard of living than we do, then you haven’t travelled very much. They do have a larger social safety net and a lot more free stuff, but at the expense of an enormous level of taxation and a huge government bureaucracy.</p>
<p>The bonds are sold to investors. The money they pay for the bonds goes to the students and the colleges. The lenders are paid a fee for processing the loan. They don’t keep the loan proceeds any more than the bond holders do. It goes to the students and the colleges. When the student pays off the loan, that money goes back to the bond holder with interest. I think investing in education is a good thing. The guarantee only come into play if the student defaults. Dr. Warren isn’t proposing to eliminate student loans, she just wants students to pay them off with government service. I seriously doubt there are enough government service jobs to absorb 540 billion dollars of loans outstanding, and if there were that would add 540 billion dollars to the federal deficit that is now being financed by the private sector. Dr. Warren’s most recent figures quoted in a Boston Globe article state that the average ug loan debt is $20k, and the average grad school debt is something like $45k. That is not unreasonable at all. There is absolutely no reason to add 540 billion dollars of debt to the federal taxpayer and increase a bloated bureaucracy along with it. </p>
<p>As for the idea of pulling all this back in to the feds and eliminating the outside lenders, yes, I know that basically Congress can do whatever it wants, but even Yale thinks it’s a bad idea:</p>
<p>[Yale</a> Daily News - Obama outlines student loan overhaul](<a href=“http://www.yaledailynews.com/articles/view/21070]Yale”>http://www.yaledailynews.com/articles/view/21070)</p>
<p>From the cited article:</p>
<p>"But Yale Financial Aid Director Caesar Storlazzi said the University has already scrutinized direct loan programs — the approach Obama supports — and determined that mandating them would create more problems than would continuing the system currently in place. He said the “most important thing is having a choice.” </p>
<p>“Students can get better deals on their student loans … through private lenders than they can get through direct loans,” Storlazzi said. “There would be groundswell of opposition if we moved to direct loans. It would be more expensive for students.”</p>
<p>Direct loans have been an option for some time now. For the most part, students have not chosen them. Like I said earlier, and the Yale guy agrees, even the colleges and universities don’t like them. But if that’s what Congress wants then I guess that’s what we’ll get. It is as you say about power and control. But even with Service Pays, all that will happen is that the loans will be paid off by the fed govt, not the student, and the colleges will still get paid with loan funds and if, as you think, that is contributing to the high cost of college, then it will continue to fuel rising college tuition costs, only it will also add to the national debt and federal tax burden as well. Private sector relief and personal choice will have been eliminated.</p>