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Wouldn't that require that the school provide the loan? If the debt is not held by the school then they are not impacted by bankruptcy. I like the theory of what you are saying but I'm not sure I want schools to become creditors.

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If you have to get a loan from a private company, and all of these students default, then the private company will not longer offer loans for education from the bad institution. If the college’s students can’t get loans, they either shutdown or charge tuition that can be paid out of pocket.

The root cause of the entire problem is outrageously large loans, provided by the government, that can never be discharged. Until we solve this problem, tuition rates will continue to rise inline with the maximum the government will allow.

>The root cause of the entire problem is outrageously large loans, provided by the government, that can never be discharged.

And given without any regard for the value of the investment. We don't allow banks to lend people $200,000 to buy a house we know is only worth $20,000 so why is it okay for Sallie Mae* to?

edit: Sallie Mae, not Fannie Mae

If student loans granted to students studying in for-profit schools became dischargeable in bankruptcy, then lenders would be incentivized to consider their graduation rates and employability of their graduates before granting loans.

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