[motherwell]

I wonder if the solution to this whole issue is a proper market, and true innovation, in student lending.

A competitive financing market, where college hopefuls compete for access to lenders' funds, and lenders compete to get quality students, could work well.

It seems that private lenders, if they could make interesting loan agreements, would be the best equipped to provide substantive loans to whomever, and we wouldn't see ridiculous degrees and subjects surviving, as students are incentivised into more productive areas.

[Newgy]

Actually the key is to get rid of government loan subsidies. They just bid up tuition and get capitalized into non-essentials like sparkling student centers.

It's no coincidence that college prices have risen as the government has increased their loan subsidies.

[JoeAltmaier]

Cart before the horse! Any evidence of cause-and-effect here? Its also true that "government loan subsidies have increased to offset rising college prices".

[jonhohle]

If you agree with Austrian economics, this follows the typical business cycle. Cheap money, inflated prices, credit contraction, bust.

In the last 5 years we've seen this happen at least three times:

  * housing
  * solar
  * equities

the insidious thing about student loans is that the borrower has little to no credit history and cannot default on the debt. A large portion of this money (40% iirc) is going to for profit institutions which have policies in place to keep a student enrolled (when any respected school would kick the the student out for low academic performance or issues of ethical conduct).

[Locke1689]

If you agree with Austrian economics,

Big if.

[gte910h]

That's' theory, not evidence.