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I've always wondered if the fact we make it so essentially students are forced to repay their student debt (even if they are otherwise insolvent) contributes to
by throwaway2016a 10y ago
I've always wondered if the fact we make it so essentially students are forced to repay their student debt (even if they are otherwise insolvent) contributes to higher cost of education.
After all, you have a captive market that has to buy your service or deal with a higher risk of unemployment and a lending institution that doesn't take on any risk.
What if we let students default on their loans?
My bet:
- Less people will go to college (not necessarily a bad thing)
- The cost of college will go down because the demand is stifled
If the government works to guarantee you will get paid, you can charge whatever you want and that might be what we are seeing.
- LeifCarrotson 10y agoAbsolutely. There are three parties here: Schools, students, and lenders. Schools set the price based on what they can get students to pay, which is a function of the willingness of lenders to give the students money. Lenders approve borrowing students based on their likeliness to repay, which is currently very large due to the legal framework. Students select college programs and loans based on a convoluted mix of 17-year-old wisdom, well-meaning advice suggesting they pursue their dreams, their ability to get the loan, and a hazy idea of future employment, income, and repayment. It's obvious that increasing the penalties to the students after graduation is about the least effective measure you can take. If students were allowed to discharge student loans through bankruptcy, that would still be a hefty penalty. Lenders would be less willing to give them money. With less money available, schools would have to charge less.