Without really thinking about it too carefully (other than to tweely tweak co-blogger Amanda on the subject of state schools) I have always thought it was just fine for the federal government to smooth out the capital market failures and provide loans to those who wished to go to school. The government alone has the power to make these loans immune to bankruptcy, and regulate its own rules for wage garnishments, etc., and it is also moved by some distributional concerns. So it was interesting to read Professors Gary Becker and Richard Posner make the case for getting the government out of the loan market.

Becker argues that without government involvement nearly everybody would be able to get loans if they wanted them, simply at a higher price. Posner goes further, suggests loans should be dischargeable in bankruptcy proceedings (what's so special about student-loans, he asks?) and also admits that some folks might decide it's no longer worth it to go to college-- what of it?

The hostile commenters miss the mark in so many ways. I am confused about the commenter who claims that missing a single payment on his credit card resulted in death and destruction to his interest rates. I missed a payment on my credit card last year (I plumb forgot) and no mayhem ensued. I paid a late fee, and remembered the next month. Something more must be going on there. Another thinks that usury is soul-destroying and that those who market loans are irrational. Barriers to entry are miniscule here and there is tons of capital floating around, so if the commenter is right he has found a chance for arbitrage. Another commenter suggests that you would have vastly differential interest rates for different disciplines (an implied premise by some other commenters is that this is a Bad Thing). I am not so sure how would this work, since at many schools, given the proper use of electives, it is not too hard to "major" in a subject while taking lots of coursework in another. Many schools would even allow a double-major, or a last-minute major-switch. If there are big bucks to be had for declaring a Math major, a kid could major in math all the way through, but use his electives in English to jump ship come commencement.

More likely, it seems to me, private institutions might give different interest rates on the basis of grades-- an A student is both more valuable on the marketplace than a D student, and more likely to be generally with-it and high-achieving. These translate into higher earnings on average, I bet, which translate into a higher chance of repaying your student loan, especially if the loan is immune to bankruptcy. I personally think this sort of discrimination would be a Very Good Thing.

I am unconvinced by Posner's case against the bankruptcy immunity, but I readily admit that I may be affected by status quo bias. It seems to me that bankruptcy statutes force good bets to subsidize bad ones, and I don't see why this is a particularly good idea. But this is more of an argument against bankruptcy than an argument about this specific case, so I'm not sure.

The resultant private market in loans would presumably be pretty heavily regulated, just as banks and the like are, and I would be sad (for distributional reasons) if the loans became completely unavailable to some potential students, but Becker has convinced me that we can do better.

Milbarge, the Slithery D, and various other folks have banded together to create a new blog, where they can all post even-more-anonymously the things they wouldn't dare post under their own non-names. It's clearerror.blogspot.com, and the results are fascinating. Actually, I think my brother (speaking about something else entirely) up my feelings best:

I ought to just ignore (it), but it's so very intriguing. Kind of like an eagle wearing a hat.

In response to my previous post about Charles Fried's book recounting his time as solicitor general, Scott of Life, Law, and Libido sends along a link to this paper of his about the confirmation of Theodore Olson as Solicitor General: Objective? Theodore B. Olson and the Role of the Solicitor General of the United States.

I remarked briefly on Mr. Olson's retirement here, and have just a few thoughts on Scott's paper, which is generally quite interesting and well-written.

I do agree that the solicitor general should be something more than the lackey of the president or the attorney general, but that seems to be a pretty common view among those who are not presidents or attorneys general. But I, with Fried, am not convinced that the SG "must take care to 'never sacrifice hsi credibility and reliability as a trusted officer of the Court.'" (that is Scott, quoting Richard Wilkins). To be sure, his institutional credibility is something he should consider, but I think there are times that the SG ought to be willing to try to persuade the Court to adopt the view of the law he thinks is correct, even at the risk of causing some or all of the Justices to realize that he is engaged in argument, not decision. Rhetoric (including my own) aside, the solicitor general is in fact a solicitor, not a justice.

[I'm also unconvinced about Scott's two main problems with Mr. Olson's conduct-- a footnote on the Second Amendment in a brief opposing certiorari where Olson didn't provide enough evidence to support his contention that the Fifth Circuit was right on the question of individual vs. collective right, and a brief in the affirmative action cases where Olson submitted to what seemed to be political pressures to tone his brief down from demanding strict colorblindness to the slightly looser but indefinite standard that the Court seems to have adopted.] But the paper is full of interesting references I am going to have to track down, and is a very solid version of my girlfriend's argument that the SG answers to nobody but the law, and the Court.