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The schools would undoubtedly respond that in doing so, they would necessarily have to stop educating people from anything less than the most privileged (and th
by Kadin 9y ago
The schools would undoubtedly respond that in doing so, they would necessarily have to stop educating people from anything less than the most privileged (and thus low-risk) backgrounds.
You'd need to cook up some sort of risk-pooling scheme if you wanted schools to extend that credit to anyone coming from a background that made payment statistically less-likely. And once you started doing that you'd have to be careful not to distort the market so much that the original intent -- to allow market forces to have more say on what majors college students go into, and who (and how many people) colleges admit -- would be totally lost.
It's a difficult problem and I don't know if it's better to have the schools/colleges trying to underwrite the loans. It might be better to leave that to specialists rather than force it onto schools (though forcing schools to release the data that an underwriter would need to rationally price loans for students to go there would be good).
If you didn't have the government backstopping student loans, and in some cases making them non-dischargeable in bankruptcy, that would probably have much the same effect. The government backing and unique legal treatment are what makes a "student loan" different than a giant personal loan. The justification has always been that without this treatment and guarantee, nobody would make a $100k+ personal loan to an 18-year-old, which is probably true. But I think we're starting to see the other side of the coin, which is that maybe there are some good reasons why that's the case.
- nerfhammer 9y agoFind some way of blinding schools from the individual financial background of applicants.
- gruez 9y agotrouble is, academic performance is (strongly?) correlated with wealth.
- Kadin 9y agoYou could do that, I suppose, but the ability to pay back the loan and the downstream income potential of the graduate are likely to be very strongly correlated to the student's financial background (really, their family's financial background). If you're wealthy enough, it basically doesn't matter what you major in while in college. But if you don't have a rich family, then it matters a hell of a lot. Students seem to already know this; at least when I was in school last, there weren't a lot of first-generation college students or immigrants in the liberal arts programs; the kids who were betting everything on their education were in the business or engineering schools, mostly. (Or sometimes preprofessional programs, pre-med was a big one.)
- Fomite 9y agoIndeed. The university where I'm currently faculty views it's mandate as making college more accessible to the state's population and supporting first generation college students. If they're going to be left holding the bag for that, they're going to stop. And to address the poster who thinks we can blind universities to a potential student's financial background...we have a very good statistics and computer science departments, and a massive data set of all our students. We can probably come up with a classification scheme in short order, "blinding" or not. Hell, I'm pretty sure you could get pretty far just from "What high school did you go to?" and the classes you took there.
- calvinbhai 9y agonot sure where I mentioned it should be tied to the "student's financial background". In fact it can be irrelavant. By the time student graduates, parents can say 'you are on your own', and the debt is still dangling. The only deciding factor needs to be the outcome which is the employability or ability to make money to repay debts. If the Outcome Rating for a program at a university is high, it means lower risk, and the university is responsible only for, say 10% of unpaid debt. If the Outcome Rating for a program at a university is low, it means higher risk, and the university takes a much higher responsibility for ~ 50% of unpaid debt.
- Fomite 9y agoBecause the "Outcome Rating" of a program is not independent of financial status. For example, the use of Classics as a major for many people who go into banking as essentially a status signifier. That only applies to some classics majors.