Reply #4: That's because that student loan is then between you and the bank whose loan the gov't guaranteed.

[Selatius]

For example, Stafford Subsidized loans simply means that while the student is in school, the gov't pays the interest on the principal while the student is still in class. (Basically, subsidizing private enterprise) Unsubsidized Staffords simply means that while the student is still in class, the student is responsible for both the interest and principal. In other words, when you get out of class, you are going to end up paying a bigger amount than you originally borrowed.

The Stafford program is simply where the government guarantees the private lender that in the case of default, the government will pay the lender for the loss. (Again, subsidizing private enterprise)

Personally, it would be easier to expand the Pell Grant program to cover all college students at 100 percent tuition costs. This way, the federal government dodges paying interest to private lenders, and it helps empower the economically disadvantaged in terms of attending university. The point is to provide economic opportunities, not saddle the less well-off with even more debt with--and this is important--NO GUARANTEE the particular student will land a job with sufficient pay to cover the debt obligations on top of the other obligations of living in the real world, such as taking out a mortgage, paying for a new car, health insurance, utility bills, auto insurance, gas, and food expenses.