It is the only way to stop them hoarding players which will then bring the wages down.
I’m more talking prem players down than anything else but if you loan to the same league the players should be able to play against parent teams.
I don't think it does stop hoarding, because they'll still have the incentive to bring in as many youngsters as possible because they can still loan them out and either a. get a first team player b. sell them for a tidy sum because they've played for Chelsea/Man City etc.
No-one really signs older players (except goalies) with the intention of loaning them out as it's a waste of everyone's time and money. With older players, the teams loaning them would be getting a finished product, the player gets games and the parent club free up some wages.
With young players team tend to get raw or unfinished products that they knock the edges off for the benefit of the parent club. All those Chelsea loanees have probably got more development from other clubs they've been on loan at than Chelsea, yet Chelsea would be the ones to receive a development fee if they moved on. Possibly along with loan fees paid by the loaning club. Really not a fair system and it's the young players being loaned out that is the problem and needs to be restricted, by making it so they are more likely to end up contracted to a 'lesser' club who would then benefit from their development.
I think there's a few things that would be more effective than banning loans for over-21;s
1. Loans out capped (as seems to be being discussed)
2. Squad limits so excess U21 players etc. have to be released
3. You cannot get any type of transfer/development/sell-on fee for any player over 21 who does not make a first team appearance during the previous season (unless mitigating circumstances like serious injury)