A Tiny Step

Senators Joni Ernst (R, IA), Chuck Grassley (R, IA), and Ron Johnson (R, WI) are proposing a law to modify how student loans are made. Their bill, the Student Transparency for Understanding Decisions in Education Net Terms, or STUDENT (aren’t we cute), Act

would provide student loan applicants with an estimate of the total amount of interest they would pay, based on a standard 10-year repayment plan, during or prior to taking out a loan….

It’s easy enough to calculate the amortization table, and the periodic and total interest paid, for any loan; there should be no problem in requiring the lender to include the tables in their student loan offers. But why wait until after the students have taken out the loan?

Aside from fixing that little fillip, though, more useful moves regarding the student loan industry include these:

  • get the government out of the student loan business altogether, including both extending the loan or guaranteeing one
  • privatize the student loan industry. Require the college/university that has the student who is taking out the loan in order to attend that college/university
    • co-sign the student loan, or
    • extend at least half of the total loan in partnership with the private lender

Of course, at the Federal level, enforcement of the second bullet would be limited to withholding Federal funds from those colleges or universities declining to satisfy either of the requirements. Further Federal enforcement would be limited to withholding a fraction of Federal transfers to those States who choose not to enact similar requirements and to otherwise publicizing and jawboning those States who choose not to go along. Those are strong incentives, though.

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