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Speaking from a purely market-driven position, the Student Loan Debt market has one issue that prevents colleges from not raising tuition prices: its the incapa
by conanbatt 10y ago
Speaking from a purely market-driven position, the Student Loan Debt market has one issue that prevents colleges from not raising tuition prices: its the incapacity to default on loans.
Its obvious a huge part of the loans are used for careers that will never make its money back, and the loans only collateral are the person itself(not his parents assets). So if someone had an arts degree that cost him 150k, and never made that money, he should be able to default on that loan. As he does that, colleges have a strong incentive to keep tuition matched with the income produced by that degree.
My understanding is that college loans have a special protection by the government that makes them undefaultable. Dont subsidy college loans! Dont take more money from all(including under represented poor people) to put it in the pockets of colleges. Just make the loans defaultable, and you will see such a massive movement of defaults that colleges will never put unpayable debt ever again.
- andorov 10y agoWhat if the schools were required to underwrite the loans on behalf of each student? Incentives would be more in line.
- conanbatt 10y agoIm not a policy expert, but I advocate for making things simpler. The capacity to default already exists and will always exist. Devise a new specific mechanism to offset another specific mechanism is like a patch to solve a patch on a bug.
- trgn 10y agoIs the $150k fine arts degree really that common? These are the anecdotes we see in the news, because they stoke populist outrage and generate rage clicks. But I think they barely register in the overall stats. My completely unfounded opinion based on personal experience is that most humanities or fine arts students come from families that actually more or less can afford it anyway.
- Mathnerd314 10y agoI've met some people in college who clearly didn't care about their finances and AFAICT were there just to get the loans for spending money. I would guess somewhere around 1 in 1000; not widespread, but every institution will have a few.
- charlieflowers 10y agoI think you're right. The most effective single intervention would be to make them defaultable. The transition would be ugly, because student loans would dry up like a pat of butter on a skillet. It would take a year or more for college tuitions to adjust, for all those administrators to be laid off, for all those leisure centers to be scrapped for firewood, etc. But then we'd be back to market driven, affordable college tuition with a solid ROI.