State Funded Student Loans?

In Uncategorized on February 23, 2009 at 9:12 pm

Got this article emailed to me through my UC San Diego Alumni email subscriptions…

University of California – UC Newsroom | State budget contains $115 million in new cuts for UC, stretches UC’s total budget challenge to $450 million

Basically the UC system is going to have a huge operating deficit if they maintain current levels, they’re going to have a $450 million shortfall of funding from the state. That’s a mind boggling, huge amount of money, although I know the recent near-trillion-dollar stimulus has made us numb to the sheer size of these sums of money.

Basically, if the UC System wants to maintain current enrollment levels they’ll have to raise tuition fees. My initial reaction to this is that students will be taking out larger student loans, which will be a direct transfer of money from the federal government to the UC system. Then, this debt will be bought by the various banks that are allowed to handle student loans (I’m thinking of the Stafford and Perkins Loans, since these are all I have experience with.)

Why not start issuing student loans at the state level? Is this done? In a way, this could help future revenue streams, as students will slowly pay them back with interest. Not that states need to become banks, but it’s not like they aren’t issuing bonds already, holding debt.

I’m not a credit expert so I don’t claim to fully understand how it all works. But this might be worth considering.


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