Question

CH3.1 Discussion Question: What happens to college students when the economy goes sour? Read the attached article under "CH3" and write a small paragraph (20 lines max) with a summary and answer the following questions: 1. Why does the government subsidize student loans? 2. What will likely happen as a result of lenders pulling out of this market? 3. Should the government do anything? CH3.2 Discussion

Answer 1

1. The governments must subsidize the student loans as they make the loans more popular and feasible among the students. If the loan is subsidized, there is no requirement for the student to pay interest for the same, when he or she is still in school. In this way, subsidised education loans and increase the overall attractiveness of loans among students.

2. When the lenders are pulling out of this market, the flow of capital in this industry will be limited. The existing lenders may have a monopoly-like situation. The rate of interest prevalent in the industry, in that scenario, will also be quite high.

3. Government must try to put an end to any kind of exploitation faced by the students at the hand of the money lenders. Cap on the maximum interest quoted from students can be kept. Awareness initiatives can be started In companies to make the students aware of the ways in which their exploitation may happen. This way, the government is making the students more aware of their own safety and security.