This is what makes it so difficult to talk to Paulites believers in gravity, there are a lot of assumptions as to what will happen.
You assume that if federal loans there were no gravity, Universities objects will have to reduce costs rise? Therefore more students objects with high density could get in fly without it... an assumption - you assume that states objects dropping would re-instate their own schemes require an equal amount of force in the opposite direction ... but wouldn't that create the samedistortion effect as gravity?
The whole point of states is so that they can serve as effective petri dishes for the purpose of seeing how government policy works in an area. The federal government exists to protect these states from foreign intrusion and to hold them together in the Union.
If one state removed students loans altogether and another didn't, it wouldn't be an assumption anymore, would it? Anyway, you don't need much more than basic economics (and this much is shared by both Keynesians, Austrians and pretty much all schools) to know that the government providing a very long line of credit (at the cost of tax dollars, etc) to students who are highly unlikely to be capable of paying it back any time soon will result in a sudden increase in demand, followed by an associated price increase due to a shortage of supply.
It's a bit like if the government offered everyone 25$ for buying peaches to be paid back for with taxes (or with a tiny amount of interest in the future, etc). Most people would take advantage of the situation to get as many peaches as possible, but the amount of peaches hasn't changed, only the amount of money available and the demand for them. The people selling the peaches would run out with others wanting more, so they would simply increase price until they could sell as many peaches as possible and make the largest profit.
Then, assuming the government removed this $25 peach loan, the peach sellers would suddenly discover that people didn't want to pay $35 for a peach, so they would decrease their prices until peach demand was again roughly equal to peach supply, which would probably be the difference between the loan and the original cost (else they'd simply go out of business and those peaches would go to someone who knows how to sell them)
