[bentcorner]

I can't pin my finger on it, but this feels too hand-wavy to me. AFAIK, the housing market crash was caused by bad lending - people with bad credit were able to get loans for homes for far more than they could afford (in the hopes of flipping the home), they defaulted, and the banks are left holding the bag.

Could this happen to higher-education? Could too many graduating students defaulting on their loans cause problems for future students in obtaining loans? I don't know how student lending works (how does a bank know when or when not to issue a loan to a student?), but I'd wager that if they aren't taking into account a student's performance record and potential future earnings, they will soon.

Google break

Huh. It looks like they don't [1]. It would be interesting to learn why they haven't yet, it seems like a good idea. It's certainly reasonable to think that there are more factors to take into account (I'm thinking that of moral/ethical considerations mentioned in the linked paper).

[1] http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1941070

[the_watcher]

Federal Loans are basically unlimited to anyone without an adverse credit history (so 18-24 year olds with no credit qualify). That is the definition of bad lending. There is no linkage between likelihood of making the investment back and size of the loan.

[mjmahone17]

That's not true, unless you're a grad student or an independent, and can take advantage of PLUS loans. As a senior, I can only take out 10 or 11k in subsidized, and 2k in unsubsidized loans. The rest has to come from family, aid or private loans.