Instapundit has gone all in for requiring colleges to have some "skin in the game" regarding student loans. He links to a Wall Street Journal story about President Trump and his desire to "require schools to take financial stake when students don't repay."
I disagree with this. Why should universities be on the hook for the bad decisions of their (adult) students? Target isn’t on the hook when people overspend there (barring bankruptcy, which is its own issue). Why should a university care if someone wants to major in Medieval Uzbeki Film Studies? The school is there to provide the education, not to determine people's ability to pay over the long term.
If schools themselves were lending students money, perhaps they'd be more careful about whom they lend to and would consider the ability to pay the loan back--especially if student loans were dischargeable via bankruptcy, which they're currently not. But if (since) schools are not lending the money, why is it their responsibility when students don't pay back debt owed to a bank (or most likely, the federal government)? Universities exist to provide an education, to expand minds--not just to provide checked boxes for future employment. Lenders charge the interest and take the financial risks.
I think (correct me if you know I'm wrong) is that the lenders are not allowed to base loans on a student's major. They should be able to assign risk to your major as in, Chemical Engineer: Yeah, you will be able to pay us back versus; Medieval Uzbeki Film Studies: Yeah, maybe ask a rich relative to fund you because we're not.
ReplyDeleteUnless lenders can discriminate based on a student's major's ability to pay back, this issue isn't going to go away.
The feds should get entirely out of the student loan business and allow private lenders to do due diligence, without consideration of colors and flavors; such that lenders can require certain SAT/ACT scores, SATII scores, HS coursework etc., regular submission of college grades/courses and deny loans to some majors - all relevant to likelihood of loan repayment. If they chose not to lend to a student with a SAT score of 850, so be it. If they choose not to lend to aspiring xyz-studies or theater majors, so be it.
ReplyDeleteI had to cosign loans for both of my kids. They have both repaid their loans. If they did not, I would have been on the hook. When did students with no credit history stop needing cosigners? AND WHAT HAPPENED TO THE CONCEPT OF PERSONAL RESPONSIBILITY?
ReplyDeleteIt strikes me as *crazy* to consider the income of parents. Are these university students adults, or not?
ReplyDeleteAccording to Pell Grant, University Students are not Adults until July 1st after their 24th Birthday.
ReplyDelete