Submitted by Anonymous2 (not verified) on August 7, 2008 - 4:31pm.
This article offers excellent ideas on how to make the student loan program more complicated and less reliable at the same time! The blogger assumes an unlimited tolerance for paperwork on the part of lenders and a willingness to make a commitment to make loans that would deny lenders the flexibility to respond to changing economic conditions.
Efforts to reform student loans should be subject to a litmus test of "does the proposal make the program more complicated?" Ideas that fail this test should be rejected. If that test were applied here, the idea would fail. The convoluted PLUS auction, ridiculed both in the loan community and at the Department of Education, would also fail a simplicity test. Readers should also note that Congress just made this already complicated new program more complicated--even before the first auction took place-- by adding in new compliance requirements and penalties--all because an examination of the auction mechanism convinced them that the "program would be gamed."
NAF seems unwilling to accept the idea that the best way to get lenders to make student loans to all students is to provide them with an acceptable return. This approach worked with very few exceptions from 1965 until 2007.
How to make student loans even more complicated
This article offers excellent ideas on how to make the student loan program more complicated and less reliable at the same time! The blogger assumes an unlimited tolerance for paperwork on the part of lenders and a willingness to make a commitment to make loans that would deny lenders the flexibility to respond to changing economic conditions.
Efforts to reform student loans should be subject to a litmus test of "does the proposal make the program more complicated?" Ideas that fail this test should be rejected. If that test were applied here, the idea would fail. The convoluted PLUS auction, ridiculed both in the loan community and at the Department of Education, would also fail a simplicity test. Readers should also note that Congress just made this already complicated new program more complicated--even before the first auction took place-- by adding in new compliance requirements and penalties--all because an examination of the auction mechanism convinced them that the "program would be gamed."
NAF seems unwilling to accept the idea that the best way to get lenders to make student loans to all students is to provide them with an acceptable return. This approach worked with very few exceptions from 1965 until 2007.