Guaranteed Federal student loans creates a horrible incentive structure that crushes students and hurts society. This proposal is a simple way to allow a free market solution that fixes this problem for future students.
Due to federal student loans students are price insensitive to University costs. So universities compete with country club facilities, attractive but worthless degrees, bloat their administration, foster lengthened degree programs, coddle students, and promote activism. The result is outrageous tuition costs, luring of students that would be better off not going to college, massive debts, and many students with educations that will not allow them to pay back the debt and not allow them to discharge the debt in bankruptcy. This dramatically impacting their ability to buy homes and have families.
With a few tweaks the free market would solve this problem for the future:
- End all government student loans
- Make student loans dischargeable in bankruptcy
- Make the university hold at least 50% of each student loan.
This will foster meritocracy for both the university and the students and aligns the universities best interests with the student’s best interest.
Universities will thrive by offering valuable degrees, at a good value, to qualified students which will allow their alumni to economically thrive and loans to be paid back. Universities that fail to do this shouldn’t be subsidized by taxpayers, more of their students won’t be able to pay back student loans, will instead discharge them in bankruptcy, and those universities will be forced to change or go out of business.