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Looking for the Unfree Lunch on Student Loans

posted by Bob Lawless

Much has been written about the Democrats' promises to enact new legislation in their first 100 hours of control over the Congress. (Aside--if my students think time passes slowly during my classes, they should see the way the congressional Dems keep time (NYT, reg. req'd).) One of the pieces of legislation is a promise to slash interest rates on student loans by half over the next five years. There have been a number of news stories on this plan, and the story in today's New York Times (reg. req'd) will get you up-to-date.

I don't know enough about the student loan program to understand exactly how this is going to work, and I'm too busy or lazy (take your pick) to educate myself on it. Maybe Credit Slips readers will help me out here in the comments. There is no free lunch, to coin a phrase, so who's paying for this? Debb Thorne posted on student loans a while back, and there is no question that reducing the crushing debt burden on graduating students would be a huge policy win for the middle class. The bankers claim the rate cut will fall on them. Is that right? Is the Democrats' plan just a big federal subsidy?

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  • As a public service, the University of Illinois College of Law operates Bankr-L, an e-mail list on which bankruptcy professionals can exchange information. Bankr-L is administered by one of the Credit Slips bloggers, Professor Robert M. Lawless of the University of Illinois. Although Bankr-L is a free service, membership is limited only to persons with a professional connection to the bankruptcy field (e.g., lawyer, accountant, academic, judge). To request a subscription on Bankr-L, click here to visit the page for the list and then click on the link for "Subscribe." After completing the information there, please also send an e-mail to Professor Lawless (rlawless@illinois.edu) with a short description of your professional connection to bankruptcy. A link to a URL with a professional bio or other identifying information would be great.

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