This is the Cato Daily Podcast for Thursday, August 18th, 2022.

I'm Caleb Brown.

One element of the political fight over student loans

concerns that the federal government might make a profit from college students.

That concern is probably misplaced according to Cato's Neil McCluskey.

We spoke last week about why the feds haven't turned a profit on student loans and probably never will.

How student lending has occurred has changed pretty dramatically over the last 10, 15 years or so.

What has changed and feel free to crow about this.

What did you predict at the time was going to happen with these changes? Well, I mean, student loans have changed in many ways.

We did change from what was the old FFEL program, which was basically you would go to some ostensibly private lender and

you would get something called a federal loan and people thought well I'm

getting this from a bank or some other lender. What's important to understand

is yes they would go to capital markets to get their money but they were 100% guaranteed

profits by the federal government so if borrowers defaulted or if they had certain fees or things

that were being charged, the federal government

made sure all that got paid.

So FFEL was kind of maybe slightly more like, you know, private lending, but not really.

It was really federal lending.

A lot of people make people get confused about that,

and they say, okay, well, what happened in 2010

was that President Obama, with Congress, by the way,

moved all federal lending to call direct lending.

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