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8 comments

1 HappyWarrior  Wed, May 8, 2013 1:16:39pm

Man that’s awesome.

2 shaggles  Wed, May 8, 2013 1:40:25pm

Sounds like a good idea. No doubt it will be voted down or filibustered.

3 DO WINGNUT WORDS SHOW THEY EVOLVED BRAINS?11!!  Wed, May 8, 2013 2:26:53pm

Where’s the Benghazi? Where’s the outrage over the lack of religious freedom for Fundy Christians?? What is she gonna’ do about the Climate change and Evolution hoax??11!!1

//

4 KingKenrod  Wed, May 8, 2013 3:32:44pm

So how exactly is something like this supposed to work? The Fed loans money to banks at 0.75%, but it’s very short term loans - overnight to 30 days (in a crunch). Student loans are long term, years, even decades. If this is only a 1 year rate lowering for new loans, it’s irrelevant, because the rates are just going to go back to normal in a year, or a lower level if Congress acts.

There’s no way this is a permanent lowering of rates for new loans written over the next year - such a thing would cause a run on college seats and tuition would explode.

I also think that using the Fed this way is a bad idea - today student loans, tomorrow what? You can make the case that almost anything the govt does is worthy of being subsidized with cheap money temporarily. Eventually someone will have to pay the going rate.

5 EPR-radar  Wed, May 8, 2013 3:37:32pm

re: #4 KingKenrod

So how exactly is something like this supposed to work? The Fed loans money to banks at 0.75%, but it’s very short term loans - overnight to 30 days (in a crunch). Student loans are long term, years, even decades. If this is only a 1 year rate lowering for new loans, it’s irrelevant, because the rates are just going to go back to normal in a year, or a lower level if Congress acts.

There’s no way this is a permanent lowering of rates for new loans written over the next year - such a thing would cause a run on college seats and tuition would explode.

I also think that using the Fed this way is a bad idea - today student loans, tomorrow what? You can make the case that almost anything the govt does is worthy of being subsidized with cheap money temporarily. Eventually someone will have to pay the going rate.

This is a good question, and will need to be addressed if this idea gets off the ground.

However, why should the big banks get loans at so much less than the going rate?

6 Decatur Deb  Wed, May 8, 2013 3:45:44pm

Went to college and grad school on the 60s era GI bill and a couple of small student loans (about 2-3%). Todays students and soldiers are getting screwed. (Feeding the kids still required the 3-11 shift on an assembly line.)

7 KingKenrod  Wed, May 8, 2013 7:12:18pm

re: #5 EPR-radar

This is a good question, and will need to be addressed if this idea gets off the ground.

However, why should the big banks get loans at so much less than the going rate?

Those loans are for emergencies, their purpose is to provide systemic stability. Banks can loan money to each other at better rates than the Fed provides.

8 EPR-radar  Wed, May 8, 2013 7:16:39pm

re: #7 KingKenrod

Those loans are for emergencies, their purpose is to provide systemic stability. Banks can loan money to each other at better rates than the Fed provides.

We still have the problem that this backstopping of the bank’s operations by the government amounts to a government subsidy of private and profitable enterprises.

I agree that a guarantee of stability is needed in the current system, but it is also clear that this guarantee is presently relied upon as a method to socialize losses when the banking sector’s bets go sour.


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