Wednesday, March 4, 2009

Student loans

"If Congress approves the plan, there will be no need to set subsidies because there will be no banks to subsidize. "

No no, not the current bank bailout (although it's easy to see how that sentence could be misinterpreted). In this case it refers to an auction the federal government is planning to hold to determine which lenders will be authorized to issue federally subsidized student loans: Education Dept. Forges Ahead With Student-Loan Auction. The idea is that banks would submit bids indicating how much federal subsidy they would require to issue student loans on agreed terms, and the lowest subsidies would win.

But "...by the time the auction process is complete, it could be moot. President Obama has called for abolishing the guaranteed-loan program altogether. If Congress approves the plan, there will be no need to set subsidies because there will be no banks to subsidize. "

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