Bailout for the Student Loan Industry (But Not Borrowers)
The Department of Education is going to buy up more student loans from private lenders in an effort to bolster the private student loan market, the New York Times reports. The move comes as investors shy away from the student loan market in the wake of the economic crisis, and large lenders like Sallie Mae stand to benefit the most:
Sallie Mae and big banks like Citigroup and JPMorgan Chase, which make thousands of government-subsidized student loans each year, stand to benefit the most from the government’s program. But so will dozens of nonprofit student lenders that are caught in the same bind. The government’s action will not resolve all worries about student lending. Student loan borrowers this year are finding it more difficult to obtain private loans, which are not guaranteed by the government and which typically carry higher interest rates and less favorable repayment terms.
Thus, in yet another industry, the government is bailing out the people at the top of the hierarchy and overlooking those at the bottom. Part of me understands this – the fact of the matter is, the way our current system is set up, most students need to borrow, and if the lenders can’t lend, that leaves a lot of people unable to get a college education at all. On the other hand, I feel that their must be some alternative to letting tuition costs creep ever higher and forcing everyone to rely so much on loans that such bailouts become necessary in times of economic distress.