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Comment by empath75 | Hacker News Reader

I think the colleges should have some skin in the game and be at least partially on the hook if the loan defaults. That should prevent some of the completely egregious price gouging.

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At the lower end, they are. If their default rate gets too high, the school loses access to federal funding altogether. Of course, places like NYU have excellent programs with valuable degrees to balance out the defaults among the less valuable degrees. Plus their graduates in those less valuable programs also are far more likely to have wealthy families to support them and certainly have more ability to go on to grad school, resetting their default risk somewhat. So really it's only super scammy, low end, primarily for-profit schools who are at risk of losing their access to federal funds. And even that is a super low bar.

This is really the only path forward: make student debt dischargable. Yes, it will make less people go to college, but too many people going to college is clearly one of the root causes of cyclical skyrocketing costs and increased borrowing.

How would reducing the costs of going to college drive down the number of people going to college?

To clarify what I mean: If student loan debt is dischargeable, that means that taking out a loan for college is actually less risky. We should expect more people to do it, not fewer.

It makes loan itself more risky and thus more expensive. Fewer people will take loans at, say, 22% APR (a good rate for unsecured loan) than at the current rate (3-7%?).

Companies comfortable offering loans to risky candidates will feel far less comfortable doing so.

There is because there is some point where the ratio between amount of money requested, and expected postgraduate earnings for the chosen degree, would make for a bad deal due to the likelihood of default.

It’s less risky for students, but loan providers won’t want to overextend themselves to accomodate institutions who promise students the moon and demand sums they won’t be able to repay to “give” it to them.

Most student loans come from the federal government, and the rates are fixed regardless of risk. So what you and parent are really suggesting is increasing interest rates on student loans, which I totally support. Getting the government out of the student loan business so that the rates can be determined by markets would seem a good first step.

I agree with this. I really think most people are better off being hired and trained on-site for their careers. Students who show tremendous promise make more sense to attend a university, and that should just be federally funded.

> ...that should just be federally funded.

Why?

If we reduce college attendance drastically, it may be necessary to maintain high end (cutting edge) universities. Otherwise only those with promise and wealth could go.

Sure. But why federally funded?

Because colleges in this hypothetical would serve the common good and the population as a whole would benefit from it's existence. How are you proposing colleges be funded?

They're currently funded many different ways: federal grants, federally subsidized loans, government (both state and federal) subsidized savings accounts, state funds, various scholarship charities, loan forgiveness programs, endowments, etc. Seems like centralizing all that money and decision-making ability into the hands of the President and the U.S. Congress would be a net loss.

How would you prevent this causing increase in interest rates on student loans?

I can't say this is true for all Universities, but accounting for inflation, at the University of Washington the cost to educate one student is the lowest it has ever been. So at least at one school they have been working hard at keeping costs down. Unfortunately, we keep reducing state funding to public schools, and the proportion of that cost born by the student is now much higher. Gone are the days that you could work your way through a state college, and it is not because the schools are price gouging.

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