Thursday, August 09, 2007

James Surowiecki discusses what's wrong with student loans in this New Yorker article.

"This convoluted process is good at making student-loan companies rich—Sallie Mae, the biggest issuer of student loans, earned $1.3 billion last year, with a return on equity that dwarfs most other companies’. But it’s not very good at getting government money to students cheaply and efficiently. President Bush’s 2007 budget shows, for instance, that it’s four times as expensive for the government to subsidize and guarantee private loans as for it to issue those loans itself. In other words, the current system is not just corrupt. It’s also inefficient. So why are we stuck with it?"