Becker and Posner present their usual lucid comments, this time on the economics of student loans, in particular the effect on interest rates of making defaulted loans difficult to discharge in bankruptcy.
Another effect of subsidizing students through government scholarships and loans is determined by the fact that entry into the college market is limited by the capital costs and by accreditation, whose requirements are often arbitrary. The experience of Western State law school in Orange County with ABA accreditation is an example.
The colleges compound the problem by acting in restraint of trade. The NCAA, for example, conspires to forbid payment of salaries to student athletes, who are an enormous profit center and mostly don't graduate.
The result of subsidies to students, then, is to enable the colleges and universities to raise tuition and fees for all students. General subsidies may increase tuition costs for students as a whole.
Although colleges and universities have their merits, they are much too powerful, and are more and more politically and culturally monolithic, verging on indoctrination. Too many people go to college. Degrees are often required as credentials where they are not needed. We would do better to embark on vigorous antitrust enforcement against colleges, reduce the occupations for which a degree is required, and encourage alternate training programs such as apprenticeships.
And so, send your kids to trucking school.