But in reality the risk is the same. Banks have to write off bad loans and government just keeps them on the books. Neither are receiving what was promised by the borrower when the loan was made. Just because it can’t be discharged in bankruptcy doesn’t make the loan less risky.
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Actually it does mean that the loan is less risky.
The federal student loan program was designed to be a money maker for the federal government.
In the statement above, “designed” is the key word.
Without that, it would never have come into existence.
Profitability was affected by massive loan forgiveness relating to “for profit” schools.
Maybe we are disagreeing about different aspects. Any summary dismissal is too easy & misses the changing realities of the federal student loan program.
No one needs to be a financial quant to understand the federal student loan program. Anyone with an agenda can reasonably argue any side. The politicians certainly do this. Reason #2 in the Wall Street Journal article states: “Plus student loans historically has been a moneymaker.” Further notes that politicians demand program cuts need to accompany any cuts in the money-maker student loan programs.
Wall Street Journal article asserts that Parent Plus loan program has always been a money maker.
Forbes also has an article which broadly asserts that one of five reasons that student loans won’t be forgiven is that the program is a money maker.
No one should expect government to underwrite loans based on their borrowers’ credit worthiness, especially without collaterals. The loans are always intended as a tool of public policy.
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