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And almost all got loans backed by the US government that they won’t be able to repay and will fall on the US taxpayer to cover. Essentially USC bilked the US t

And almost all got loans backed by the US government that they won’t be able to repay and will fall on the US taxpayer to cover. Essentially USC bilked the US taxpayers out of millions, with these poor students serving as the unfortunate middlemen. Solution: make the universities have some skin the game - cover 20% of the principal on defaulted loans.

dnissley 5y ago
Agreed. Any proposed solution to the student debt crisis that doesn't hold schools accountable is not a solution at all.
passivate 5y ago
Yep, Additionally we could also push for tuition-free community colleges to reduce the need for for-profit colleges in the first place.
- csee 5y ago
  That's a great idea as long as we're not subsidizing activist disciplines such as gender studies. I'd be happy for my tax money to be going towards free computer science courses at a community college.
woeirua 5y ago
Given the price inelasticity of college, the money to cover these defaults would probably just come from other students. They'd just hike tuition to cover the risk. A much better solution is to revoke the ability of students at specific schools/programs to qualify for federal student loans if the outcomes of the program are poor. Turn off the spigot of money, and they will cleanup their act really quickly.
- vgeek 5y ago
  There was a push with the Common Data Set (https://commondataset.org/ https://commondataset.org/) to help increase transparency to potential students, but it runs into a Prisoner's Dilemma, with poor outcome organizations opting not to participate. The Department of Education should have a vested interest specifically in the way that you mention, and they did set up a site that communicates historical outcomes of majors at a per school level at https://collegescorecard.ed.gov/ https://collegescorecard.ed.gov/, but it gets little visibility in the college marketing funnel that is filled with for profit enterprises like US News and Niche-- plus the marketing (admissions and/or athletics) departments of colleges themselves.
- datavirtue 5y ago
  You can't just hike tuition unless the government is pumping out 100% loans. This is crazy.
cobookman 5y ago
US Government gets paid back also through tax revenues on the salaries of the school, salaries of studends, expenditures of the schools to US based companies, etc. It might still be favorable for the US Tax Payer even if these loans end up un-paid.
- bluedevil2k 5y ago
  I don't know what colleges you're looking at, but you're misguided if you think colleges spend 100% of the tuition they receive. Schools like Harvard, Yale, Duke, etc. have multi-billion dollar endowments that just keep growing. Many colleges have so much money coming in and are forced to spend to keep their non-profit status that they build opulent dorm rooms, buildings they don't need, and have more Vice Provosts than banks have Vice Presidents. My own alma mater has TWO art museums on campus!
  - lazerpants 5y ago
    Most universities I'm familiar with spend 100% of their tuition on operations and some amount over that from endowment income. While they do have endowments, those are restricted and cannot be used for anything except their contractually agreed to purpose (scholarships, faculty lines, research for xyz thing, etc.).
jdavis703 5y ago
Won’t that solution make it harder for students from economically disadvantaged backgrounds to get loans? Or is the idea here that universities would be prohibited from applying risk management to their loan portfolio?
- datavirtue 5y ago
  Most economically disadvantaged people don't even know they can get a loan. I used to assume everyone knew about government college loans. Most do not.
snarf21 5y ago
I agree but I think the government should set a max on the amount they will guarantee. The colleges are smart and will set tuition at the max guarantee because they don't want risk. They can cut social programs and stop building Taj Mahal dorms to get the price back in line.
literallyaduck 5y ago
We should aggressively target universities who commit this type of fraud and seize their assets, buildings, real estate, donations and endowments to recoup the taxpayers money.
- jamestimmins 5y ago
  Where is the fraud? I acknowledge the unethical behavior, but that's distinct from fraud.
  - literallyaduck 5y ago
    Underwriting loans which the borrower has no ability to repay is fraud.
  - csee 5y ago
    It's a confidence game being played on 17 year old kids who don't know any better. I agree it's a grey area and the fraud label may not fit, but it's fairly close to the truth.
    - s1artibartfast 5y ago
      The Confidence Game that the US government is playing on 17 olds. It's not the universities that are giving people loans to walk into a casino. Perhaps we shouldn't seize the assets of random voters who enacted these programs
Rebelgecko 5y ago
Based on my understanding of PSLF, that's a feature not a bug
HWR_14 5y ago
Your proposal pretty much already exists (although at the 10/90 split level). If your program doesn't have 10% covered by non us government loans in any year you can lose eligibility for any us government loans going forward. It's happened before, in fact I think that is what forced DeVry to shut down.
Apes 5y ago
Change it to 50% cover that must be paid via claw-backs from Administrative bloat salaries/bonuses, and it would make sense.
azth 5y ago
A better solution is for the universities to completely absorb the loss and never receive the remainder of the loan instead of it being on taxpayers' shoulders. This way at least they'll think twice before offering worthless degrees for hundreds of thousands of dollars.
xyzzy21 5y ago
It's the EXACT SAME financial disconnect between risk and reward that cause the 2008 crash. AKA Moral Hazard.

dnissley 5y ago

Agreed. Any proposed solution to the student debt crisis that doesn't hold schools accountable is not a solution at all.

passivate 5y ago

Yep, Additionally we could also push for tuition-free community colleges to reduce the need for for-profit colleges in the first place.

csee 5y ago
That's a great idea as long as we're not subsidizing activist disciplines such as gender studies. I'd be happy for my tax money to be going towards free computer science courses at a community college.

woeirua 5y ago

Given the price inelasticity of college, the money to cover these defaults would probably just come from other students. They'd just hike tuition to cover the risk. A much better solution is to revoke the ability of students at specific schools/programs to qualify for federal student loans if the outcomes of the program are poor. Turn off the spigot of money, and they will cleanup their act really quickly.

vgeek 5y ago
There was a push with the Common Data Set (https://commondataset.org/ https://commondataset.org/) to help increase transparency to potential students, but it runs into a Prisoner's Dilemma, with poor outcome organizations opting not to participate. The Department of Education should have a vested interest specifically in the way that you mention, and they did set up a site that communicates historical outcomes of majors at a per school level at https://collegescorecard.ed.gov/ https://collegescorecard.ed.gov/, but it gets little visibility in the college marketing funnel that is filled with for profit enterprises like US News and Niche-- plus the marketing (admissions and/or athletics) departments of colleges themselves.
datavirtue 5y ago
You can't just hike tuition unless the government is pumping out 100% loans. This is crazy.

cobookman 5y ago

US Government gets paid back also through tax revenues on the salaries of the school, salaries of studends, expenditures of the schools to US based companies, etc. It might still be favorable for the US Tax Payer even if these loans end up un-paid.

bluedevil2k 5y ago
I don't know what colleges you're looking at, but you're misguided if you think colleges spend 100% of the tuition they receive. Schools like Harvard, Yale, Duke, etc. have multi-billion dollar endowments that just keep growing. Many colleges have so much money coming in and are forced to spend to keep their non-profit status that they build opulent dorm rooms, buildings they don't need, and have more Vice Provosts than banks have Vice Presidents. My own alma mater has TWO art museums on campus!
- lazerpants 5y ago
  Most universities I'm familiar with spend 100% of their tuition on operations and some amount over that from endowment income. While they do have endowments, those are restricted and cannot be used for anything except their contractually agreed to purpose (scholarships, faculty lines, research for xyz thing, etc.).

jdavis703 5y ago

Won’t that solution make it harder for students from economically disadvantaged backgrounds to get loans? Or is the idea here that universities would be prohibited from applying risk management to their loan portfolio?

datavirtue 5y ago
Most economically disadvantaged people don't even know they can get a loan. I used to assume everyone knew about government college loans. Most do not.

snarf21 5y ago

I agree but I think the government should set a max on the amount they will guarantee. The colleges are smart and will set tuition at the max guarantee because they don't want risk. They can cut social programs and stop building Taj Mahal dorms to get the price back in line.

literallyaduck 5y ago

We should aggressively target universities who commit this type of fraud and seize their assets, buildings, real estate, donations and endowments to recoup the taxpayers money.

jamestimmins 5y ago
Where is the fraud? I acknowledge the unethical behavior, but that's distinct from fraud.
- literallyaduck 5y ago
  Underwriting loans which the borrower has no ability to repay is fraud.
- csee 5y ago
  It's a confidence game being played on 17 year old kids who don't know any better. I agree it's a grey area and the fraud label may not fit, but it's fairly close to the truth.
  - s1artibartfast 5y ago
    The Confidence Game that the US government is playing on 17 olds. It's not the universities that are giving people loans to walk into a casino. Perhaps we shouldn't seize the assets of random voters who enacted these programs

Rebelgecko 5y ago

Based on my understanding of PSLF, that's a feature not a bug

HWR_14 5y ago

Your proposal pretty much already exists (although at the 10/90 split level). If your program doesn't have 10% covered by non us government loans in any year you can lose eligibility for any us government loans going forward. It's happened before, in fact I think that is what forced DeVry to shut down.

Apes 5y ago

Change it to 50% cover that must be paid via claw-backs from Administrative bloat salaries/bonuses, and it would make sense.

azth 5y ago

A better solution is for the universities to completely absorb the loss and never receive the remainder of the loan instead of it being on taxpayers' shoulders. This way at least they'll think twice before offering worthless degrees for hundreds of thousands of dollars.

xyzzy21 5y ago

It's the EXACT SAME financial disconnect between risk and reward that cause the 2008 crash. AKA Moral Hazard.