[lbearl]

I hear that argument all of the time, but in reality the colleges aren't the ones giving out loans. What will probably happen is that loans will start being more difficult to get, which in turn will make getting into college even more difficult for people who already struggle to pay for it.

[int_19h]

The argument is that the colleges are basically building their business model around those loans, because government regulations guarantee easy access to those loans, with no collateral and no barriers on obtaining one (http://www.collegescholarships.org/loans/guaranteed.htm). This means that anyone can get it, and that in turn makes it viable for college to demand that everyone does (by charging exorbitant amount of money).

From this it follows that if government gets out of the business of such loans, then a lot fewer people would be able to get them - which would mean that colleges would suddenly get a lot less applicants, sending their revenues plummeting. Which, in turn, would force them to lower the prices.

It's doubtful that it would bring them to the point where a loan wouldn't be necessary for most students, and it would still exclude quite a few who cannot afford such a loan, or wouldn't qualify for it. But one could argue that it's better to not be able to take such a loan in the first place, then to be able to take it only to be saddled with a mountain of debt with no hope of repaying it, and no ability to discharge it in bankruptcy.

IMO, if we want universal high education, the government needs to be in the game, but instead of providing traditional loans, or underwriting such from private parties, we should have a system whereby a loan is unconditionally provided in exchange for a share of future income, with a progressive bracket system (i.e. you don't pay anything below $X, including if you aren't working; and you pay a percentage off anything earned above $X). Percentage would be variable depending on how much income, on average, is expected to be earned by holder of a given degree, based on the current job market - this is to avoid subsidizing too many "worthless" degrees that never pay anything back.

Also, I would expect such system to emphasize trade schools over "real" college - and that is a good thing.