As part of the $700 billion government bailout, Secretary of the Treasury Henry Paulson wants to use some of the money to purchase private student loans. Is this a good idea?

First of all, it’s important to distinguish between federal student loans and private student loans.  Federal loans are guaranteed by the U.S. government.  Students become eligible for these loans by filling out a Free Application for Federal Student Aid (FAFSA) form.  According to the San Antonio Express, federal student loans have not been affected by the financial crisis, and there’s a good chance things will stay that way.  Since these loans are guaranteed by the government, they’re about as low-risk as you can get as far as banks are concerned, so hopefully, the federal student loan system is secure. Read the rest of this entry »