[bumby]

An alternative is to tie the federal student loan program to a regulation in school cost. If the school exceeds some threshold, their students are no longer qualify for federally-backed loans. Granted, it creates administrative burden but it’s the only proposal I’ve heard that seems to address the root problem of tuition costs and almost unfettered access to collateral-free loans.

[Repulsion9513]

That's unlikely to be accepted for other reasons. Putting a limit means most will approach that limit, and those that exceed the limit will be even more unaffordable. Plus no one will agree on what the limit should be. Which makes them extremely unpopular (except for benefits to individuals which of course should have the lowest limit possible nationwide)

[bumby]

>Plus no one will agree on what the limit should be.

We do this with drug reimbursement costs and construction already and I’m pretty sure those for-profit companies would also disagree on what the limit should be. I also don’t think it needs to be a one-size-fits all threshold; it could be adjusted to COL and/or job prospects that are tied to graduate statistics. IMO that goes a long way to aligning the incentives of the student and the institution.

I’m curious if you have an alternative solution

[Repulsion9513]

Yeah, I intentionally didn't say it wouldn't happen, just unlikely :)

Personally I think limits (and significantly higher grants to make student loans unnecessary for a basic post-secondary education) are needed. But I think it's worth recognizing that limits will make what's already a very divisive issue, even more divisive...

[bumby]

I think more thoughtful limits would be a good idea. I also think the reduction of aid money has been part of the problem. I just don't know where the money comes from to shore up that problem.

I have seen other pilot programs. I think it was Purdue who was considering "buying stock" in students, where the student would pay a portion of their income for a certain number of years in exchange for a scholarship.

[rayiner]

That would be a good idea.

[eru]

> [...] and almost unfettered access to collateral-free loans.

If people voluntarily want to pay high costs, and other people voluntarily want to make loans, who are we to judge?

We just need to get tax payer money out of the game. Afterwards, people can go nuts with their own money.

[bumby]

We are to judge because we are the taxpayers who guarantee the vast majority of those loans. That’s the mail reason I said “collateral-free.” Most of those loans would not happen in a private market because teenagers, in general, do not have collateral to secure the loan, meaning they have little to lose by defaulting.

[BobaFloutist]

Their degree and future earning potential is supposed to be the collateral.

Unfortunately, the earning potential of a generic bachelor's degree seems to have mysteriously fallen at roughly the same time a flood of students were offered huge loans to achieve them. Maybe some day we'll be able to find the connection.

[bumby]

I don’t think that’s correct. You can’t put up “future earning potential” as collateral while simultaneously allowing for discharge of debt in bankruptcy. That results in an incentive to incur as much debt as possible and then declare bankruptcy shortly after graduation when the impact is negligible. That’s the whole reason why student loans aren’t generally dischargable in bankruptcy.

[BobaFloutist]

Yeah exactly. That's the original theory. It... doesn't seem like you disagree with me.

[bumby]

I do not disagree, I’m just curious what ideas are out there to manage the unintended consequences.

[eru]

> We are to judge because we are the taxpayers who guarantee the vast majority of those loans.

Yes, get the taxpayer out of the loan guarantee business. Sorry, I thought that was a given.

[bumby]

I’m not against that, but I do think just getting rid of federally backed loans previously causes more problems. (Ie it’s one of those simple cures that may ignore blowback) Do you think there is an opportunity gap to be closed? If so, how do you think that would work?

[eru]

> (Ie it’s one of those simple cures that may ignore blowback)

I actually want exactly the 'blowback': I want student loan creation to fall off a clip.

> Do you think there is an opportunity gap to be closed?

What is an opportunity gap?

> If so, how do you think that would work?

I'm guessing here what you mean by opportunity gap. I think the cheapest way is to open the US labour market to virtually anyone on the globe. That would be good for the US economy, wouldn't cost the tax payer anything (in fact you would save on border enforcement), and the people with the least opportunities globally would benefit enormously.

If you only care about Americans, I would suggest to give poor people money, and let them decide what to do with it.

Eg whatever the cost to subsidise education (including subsidised student loans) right now, just pay it out to poor people. Than they can buy education, or whatever else they deem more necessary.

[bumby]

>whatever the cost to subsidise education (including subsidised student loans) right now

It sounds like you may not understand how the system works. It doesn’t cost the government anything, with the exception of the loan repayment pause surrounding COVID.

I know the simple solutions like “Just give away money” can be seductive, but IMO they generally don’t work well in complex and nuanced problems. People aren’t rational actors by and large, and it’s a mistake to assume they can be modeled as such in many cases.