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Comment by HiLo | Hacker News Reader

For the same reason the government hires construction firms to build roads, for the same reason the government hires contractors to build bases, the same reason the Federal Reserve uses primary banks as intermediaries, the same reason the military gets their fuel from tender offers and not their own refineries...

Plus, I can only imagine what would happen to the GOP/austerity/small government types if you started suggesting they move all those (necessary) function in house. Oh man that would be a fun debate to watch.

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There's a couple of different categories there.

One is surge capacity for occasional needs. While the federal government is paying for some road building somewhere all the time, they might not want to hire permanent civil servants in a particular place for a project that's only going to last a few years. There's some sense to that.

Another category is where the government is buying goods or services off the shelf that lots of other entities buy too. That's your fuel example. Here again, there's sense to not duplicating effort.

But the last category is where the government is the only buyer and it's a permanent need. And that's where I don't see any sense to it.

Good points, actually, but can you clarify on what you mean with the government being the only buyer of student loans? All those other needs are permanent, too. "Roads" will permanently be under constructions somewhere, just as "loans" will always be outstanding somewhere. Fuel will always be needed, just in different grades, locations, and quantities.

Just to be clear on my point, it's not very hard to go and buy a portfolio of student loans for yourself (assuming you'd want them...)

The private student loan industry is pretty small as compared to the public market and the rules and considerations when servicing them are very different. So it is unsurprising that the big servicers for federal student loans are only in that business and not loan servicing generally. That's different in important ways from a refinery that sells fuel to all commers.

As for the road example, road building is an inherently local activity. If the federal government hired someone to hold a flag in Topeka it's be pretty unreasonable to expect him to start holding a flag in Phoenix next. So in that sense the need is temporary. But loan servicing can be done anywhere. My servicer is in NH for example. So the government could hire a bunch of people anywhere and bring it in house.

Why wouldn't the government hire shortist-term employees for road projects, same as the contractors do? contractors aren't out building private highways for the rest of the time everywhere.

The functions are necessary, it isn't necessary that government performs them. By definition, if there is necessity there is a demand, and where there is a demand...

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