(This is just a draft, but I\u2019ll post this for comment as I work on it.)<\/p>\n
Let\u2019s do this step-by-step, starting with two conditions:<\/p>\n
1. \u00a0Student loans are dischargeable in bankruptcy. \u00a0This seems common-sensical. \u00a0We can add restrictions that loans must be a given number of years old, to try to limit abuse, or specify that they can only be a part of a debt-repayment plan type bankruptcy, rather than wiped out altogether.<\/p>\n
2. Student loans are not government-issued or guaranteed. \u00a0Any lender who issues a student loan is taking a chance in the same way as when they issue a mortgage, or a credit card.<\/p>\n
But \u2013 but there\u2019s no way students will be able to afford the interest rates! \u00a0They have no collateral, and they have no credit history. <\/p>\n
So: \u00a0first thought experiment. \u00a0What if colleges themselves issued the loans? \u00a0The funds could come from their endowment or from bonds that they themselves would issue. \u00a0This would certainly require them to be more selective in their admissions, not in terms of top academic achievers, but in terms of those most likely to succeed with gainful employment in their field of study. \u00a0And of course, this\u2019d be a significant motivator in controlling their own costs.<\/p>\n
Update: \u00a0more thoughts; as I said, a work in progress.<\/p>\n
The goal of student loans or other forms of financial aid should be to enable students to attend college, with a debt load that\u2019s manageable afterwards (for both graduates and drop-outs), without creating a moral hazard\/\u201dgaming the system\u201d situation for either students (bankruptcy or intentional default) or the universities themselves (raising tuition\/R&B; costs with no effort at cost containment, admitting students without a realistic chance of success, practicing price discrimination based on parents\u2019 income and data-mining). \u00a0Oh, and parents shouldn\u2019t be obliged (by law or otherwise) to take out supplemental loans that endanger their own financial well-being, or imperial their chance at retirement. <\/p>\n
Clearly our student loan and financial aid system funnels money to students, but is a bust in terms of these criteria. \u00a0Average debt loads may be manageable, but that masks the students at the upper end of the distribution \u2014 and these debt load statistics don\u2019t include, so far as I know, any parental loans or other private loans taken out by students who max out the federal loans. \u00a0The cases of students who face student loan bills at retirement may be more anecdotal than statistically numerous, but they\u2019re a worry nonetheless. \u00a0I do think the thesis (is this Richard Vedder, maybe?) that the increases in federal financial aid have not made college more affordable, but have simply enabled colleges to raise tuition, fees, and room & board more freely than otherwise. \u00a0And I find the demands that parents spend their retirement savings (because that\u2019s what taking out PLUS loans amounts to, even if they\u2019re not dipping into the 401(k) directly) to be appalling, as a parent.<\/p>\n
Just raising the loan maximums, or lowering the interest rate, or making loans dischargeable isn\u2019t going to fix this in itself. \u00a0The income-based repayment program, especially for grad school where there\u2019s no maximum loan amount, is a terrible moral-hazard issue \u2014 there seems to be no limit to the extent you can raise tuition if you know the government is going to make up the difference rather than it burdening students.<\/p>\n<\/body><\/html>\n","protected":false},"excerpt":{"rendered":"
(This is just a draft, but I\u2019ll post this for comment as I work on it.) Let\u2019s do this step-by-step, starting with two conditions: 1. \u00a0Student loans are dischargeable in bankruptcy. \u00a0This seems common-sensical. \u00a0We can add restrictions that loans must be a given number of years old, to try to limit abuse, or specify […]<\/p>\n","protected":false},"author":2209,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[202],"class_list":["post-283","post","type-post","status-publish","format-standard","hentry","category-uncategorized","tag-financial-aid"],"yoast_head":"\n