4 ms·

I guess every market needs someone to set the rules (at least, any legal market in an advanced economy), but I agree that the rules we have chosen for this one

by iguy 7y ago

I guess every market needs someone to set the rules (at least, any legal market in an advanced economy), but I agree that the rules we have chosen for this one are truly terrible. My favorite suggestion is to cap the repayments (of non-dischargeable loans) at something like 15% of income above poverty line, and time-limited to 20 years. And let lenders use all the information they can lay their hands on when making offers (schools, majors, test scores). Then the offers made to 17-year olds will reflect pretty well the earning potential of different paths. Some luxury degrees will, like other all-expenses vacations, only be available to the wealthy, which is OK. In courses which represent a gamble (is that Spanish Lit. en route to the State Department or to Starbucks?), those who do well will subsidise (a bit) those who do less well, but nobody's payments will be unaffordable.

notfromhere 7y ago
What's going to happen is that unsubsidized lenders will only lend to wealthy families with collateral. Given how closely family income and educational attainment run, lenders simply won't bother.
wpietri 7y ago
That might be a step forward, but the problem with this is that it will under-lend to things that are societally valuable but not personally lucrative. For example, we want lots of teachers and librarians, social workers and nurses. But if we only pay based on personal income, we'll get lots of people with low social value but high income. E.g., corporate lawyers, investment bankers, corporate raiders, advertising executives. I think the better thing to do is publicly fund education and the have the government capture the gains via taxation. That's harder to tune, but I don't have reason to believe the outcome will be more lopsided than a purely market-driven approach, and has the big advantage of not funding a whole industry of student lenders.

by iguy 7y ago

notfromhere 7y ago

What's going to happen is that unsubsidized lenders will only lend to wealthy families with collateral. Given how closely family income and educational attainment run, lenders simply won't bother.

wpietri 7y ago

That might be a step forward, but the problem with this is that it will under-lend to things that are societally valuable but not personally lucrative. For example, we want lots of teachers and librarians, social workers and nurses. But if we only pay based on personal income, we'll get lots of people with low social value but high income. E.g., corporate lawyers, investment bankers, corporate raiders, advertising executives. I think the better thing to do is publicly fund education and the have the government capture the gains via taxation. That's harder to tune, but I don't have reason to believe the outcome will be more lopsided than a purely market-driven approach, and has the big advantage of not funding a whole industry of student lenders.