Question

What are some of the economic arguments for and against government intervention in the
market for student loans? Do you believe that class size reductions will help student performance?

Answer 1

Government intervention in the market for student loans has economic arguments that are in support as well as in against also.

Economic arguments supporting  government intervention for student loan market are as follows:

A. It will correct the positive externality and social equilibrium of output in terms of students education will be achieved.

B. It will build human capital in the economy  and return back with more innovation, technology development and inventions. Further, it will regulate the institutions that make higher interest rates on education loan.

Economic arguments against government intervention for student loan market are as follows:

A. Government intervention causes constraints in establishing a true market economy where demand and supply force achieve the equilibrium.

B. Government intervention will increase the NPA of the banks and other loan providers if students make default.

Class size reductions will not necessarily help students' performance, though it will reduce the student to faculty ratio and faculties can give more attention to the each students. But,  the student's performance can only be improved when teaching methodology is more pragmatic, practical and according to the topic of study. It will make students better understand the subject and implement in real time world cases. So, simply reducing the class size, is not enough to improve the student performance.