[cj]

Imagine a world where lenders charged different interest rates depending on the risk profile of each school.

Lower interest rates for schools where graduates repay their debt, higher interest for schools where many people default.

Assuming it wouldn’t disproportionately affect disadvantaged populations, that could be an interesting way to incentivize schools to get their shit together and prepare students for starting their career

[LorenPechtel]

I've suggested a very different approach:

Don't have a dollar amount that you repay. Rather, your student loan payment is x% of (your income minus the average rate for those with a high school diploma) for y years. Forgiveness programs for certain fields go away--instead, the tab gets picked up perhaps with a multiplier. Disability, death? Irrelevant--a dead person generally makes nothing, the amount owed is $0. (Generally makes nothing because there can be ongoing income from something they produced. That would be subject to the loan repayment.)

[cj]

Devils advocate: I don’t think this would work due to the cash flow uncertainty the models causes.

If universities don’t know how much they’re going to bring in over the next few years, they won’t be able to budget effectively.

And then there’s the question of whether it’s acceptable for the lender to collect more than what was borrowed. E.g. if I graduate college, start a company, and sell it for $100 million.. am I then paying my alma mater (or lender) millions? If so, would universities make more money from the commons or are they banking on a very small percent landing extremely lucrative gigs post-graduation? I don’t think we want the model to resemble startup financing, where nearly all fail and a small handful pay for the rest (that works for startups, doesn’t work for people’s careers)

I like the concept though. In 2010’s when I was entering college, I actually made a website trying to solicit someone to pay for my education in exchange for a percentage of my future earnings. I found no takers at the time.

[AnthonyMouse]

That effect would be drowned out by all the people defaulting en masse because getting out of a six figure unsecured debt is worth more than a temporary hit to your credit score.

[cj]

If that’s true, why isn’t everyone already doing it? Especially if 87% of student loans are forgiven during bankruptcy - maybe people just aren’t aware it’s possible.

[AnthonyMouse]

"Possible" and "easy" are two different things. 87% is of the people who applied for it, but they would be the ones most likely to have it granted because there is little reason to pay lawyers to file a form which is likely to be rejected. But the more you relax the requirements, the more people do it, which is of course the problem.