Anyone who cares to take a look can see that those prices have skyrocketed over the last 20 years, well above the inflation rate. The fact that “SL Esq” doesn’t have the spine to put his/her full name on the post pretty much tells the story. Get the government and its nameless, overpaid, and unaccountable bureaucrats OUT of our lives, except for national security and the courts. Get ‘em out. They’re too expensive, too incompetent, totally unaccountable, and completely comatose.

First, the fact that Sallie Mae’s federal student loan program relies on guaranties from the federal government can hardly qualify it as a state actor. That’s equivalent to calling Sirius/XM a state actor because the government negotiated the terms under which the companies could merge or calling every physician a state actor because the government sets Medicare reimbursement rates.

Sallie Mae’s federal loans are made on the same terms as every other federal loan, whether written by JPMorgan, Fifth Third, Keybank, PHEAA, etc. Last year, Sallie Mae wrote less than 25% of all federal (FFELP) student loans.

The reference to Ms. Collins column also reflects a lack of knowledge about the industry. The reason taxpayers subsidize FFELP loans is because the public has an interest in ensuring student loans are available at certain interest rates. I suspect your post doesn’t sincerely intend to insinuate that these lenders would continue to make these loans to the same recipients at the same interest rates without taxpayer guarantees. The market has already proven that notion incorrect based on the rates available for private loans from these same lenders. The terms for the private loans include higher interest rates and more difficult credit criteria.

So, sure, the government could stop supporting these loans. And just as assuredly, these loans would stop being available.

Now, to the question of whether the government could save money by writing the loans itself. There may or may not be an opportunity for savings, but it certainly isn’t $94B over ten years. Servicing student loans requires a massive infrastructure including call centers, data centers, marketing teams, financial aid advisors, banks, accountants, lawyers, etc. The government could certainly do all these things, but not without creating a massive new branch of the Department of Education. And ironically, the easiest way to save money would be to eliminate many of the requirements the government places on the lenders now, including detailed record-keeping and communication responsibilities. The way the government saves $94B is by choosing to not meet its own standards for good servicing.

If you look at the numbers, the $94B is pure fiction. As of a year ago, there were about $375B in outstanding FFELP loans. $9.4B is 2.5% of those loans. Do we really think the government can service all those loans with overhead of less than 3% of assets?

The real opportunity for the government is probably in switching to Direct Loans, while letting the current industry infrastructure service those loans. That lets the government capitalize on its position as guarantor without requiring a massive expansion of the Department of Education (not to mention the loss of thousands of private sector jobs). There’s no reason to think the government can service the loans cheaper and better than the private sector, but there may be a small margin of savings by writing the loans directly.