This crisis won't be the same at all, because you can't discharge student loan debt. There is currently no reason for a lender to bother examining the loan because repayment is virtually guaranteed. Having the federal government take over the loans will only make the problem worse. Educational institutions are able to raise their prices precisely because they know that with a combination of federal and state grants and loans, anyone can go to college so why not inflate the prices sky-high?
That's what happens when you mix unlimited government subsidies into what used to be a free-market system.
I think this is a misconception. You can't discharge a student loan, but you can just stop paying them. The worst that can happen is that your credit gets ruined and you get your wages garnished at a rate which has a cap based on your income (which isn't much if you don't make much$$$).
Three years ago they thought people wouldn't walk away from underwater mortgages either.
I agree that gov backed student loans are making the situation worse but removing them would be disastrous. Maybe and I can't prove this but maybe, if the gov was the sole lender, they could pressure universities into reducing tuition?
Scary thing is that the government will be the sole backer of educational loans. We all know how slow and antiquated they operate. I don't know if this is going to be a good or bad thing for the economy.
The type of pressure universities will get from the government will only be the kind of pressure that is politically expedient. We have enough affirmative action university system as it is.
That's what happens when you mix unlimited government subsidies into what used to be a free-market system.