Individuals may rationally avoid the downside risk of a college degree, even if the expected value is positive. As a toy example, suppose college costs $200k and increases lifetime earnings by $2m 90% of the time, or by $0 10% of the time. As a high school grad, I'm not sure I would take those odds; $200k of debt could ruin my life. But the government may prefer that everyone take this gamble, because most individuals will benefit and also it will pay for itself in increased tax revenue, etc.
I'm not sure how well this maps to reality, and maybe you're right-- maybe the government should only offer loans, and only to students who have a high probability of paying them off. But I still feel that this is a step in the right direction.
I'm not sure how well this maps to reality, and maybe you're right-- maybe the government should only offer loans, and only to students who have a high probability of paying them off. But I still feel that this is a step in the right direction.