I can be brief since the discussion among those commenting already answered many of the issues raised in other comments.
Some claim that a free market for student loans could not work well because lenders would charge high interest rates, like credit card companies do. But high credit card rates are mainly due to the high cost of servicing these accounts because they have relatively low dollar amounts per account, and high default rates. These forces raising market interest rates would be absent under my proposed student loan program because default rates on student loans would be much lower, and the typical amounts borrowed to finance education would greatly exceed the typical debt on a credit card.
Some of the comments reflect a concern that a free market in loans would place history and other humanity fields at a major disadvantage since earnings in these fields are below those in engineering, business, and other specialties. Of course, they are already at a disadvantage under the present student loan system. The best way to encourage these fields is not by continuing to subsidize all student loans, but rather directly to subsidize students who major in humanities with lower tuition, more easily available scholarships, and in related ways. If a subsidy is desirable for any activity, it is always more efficient directly to subsidize the activity rather than using roundabout approaches.
There were several allegations of declining economic benefits of higher education. In fact, during the past three decades these benefits have gone sharply up, not down, and unemployment rates of college graduates remain way below those of high school drop-outs and high school graduates.
Fannie Mae and Freddie Mac charge substantial amounts for their insurance of home mortgages-the current attacks on these companies allege among other things that they charge too much because of their monopoly power. But the default rate is low on insured and other mortgages mainly because borrowers have to use their homes as collateral. Since student borrowers in a free market for student loans could not use their education as collateral, I proposed to offset that defect with other advantages. Perhaps most important is to continue the present system that does not allow student loans to be discharged through declaring personal bankruptcy.