Jacob Sullum’s syndicated column is a good synopsis of the folly of Democrats’ plans to cut the interest rate on student loans.

If they really want to cut the cost of a college education, they’d stop subsidizing it altogether. As Sullum points out (as have I), studies show that the cost of a bachelor’s degree has increased at about the same rate as the federal ceiling for student loans. Federally-backed loans create an artificial glut of college students (artificial in the sense that there are many more than there would be in an unsubsidized market), which creates a seller’s market, which means there’s little incentive for colleges to keep costs down to attract more students. They can charge whatever they want, at least up to what the government is willing to lend.

Short of ending federal loans (which will never happen), there is one thing Democrats could do — but won’t — to ease some of the pain of education debt. They could remove the silly law that prevents student debtors from refinancing a loan more than once. If a private lender wants to pay off my student debt for me, and refinance at a lower interest rate, why in the world should the federal government stop that from happening?

This entry was posted on Wednesday, January 17th, 2007 at 10:59 am by Radley Balko and is filed under Uncategorized. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.