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Comment by bluedevil2k | Hacker News Reader

And almost all got loans backed by the US government that they won’t be able to repay and will fall on the US taxpayer to cover. Essentially USC bilked the US taxpayers out of millions, with these poor students serving as the unfortunate middlemen. Solution: make the universities have some skin the game - cover 20% of the principal on defaulted loans.

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Given the price inelasticity of college, the money to cover these defaults would probably just come from other students. They'd just hike tuition to cover the risk.

A much better solution is to revoke the ability of students at specific schools/programs to qualify for federal student loans if the outcomes of the program are poor. Turn off the spigot of money, and they will cleanup their act really quickly.

There was a push with the Common Data Set (https://commondataset.org/) to help increase transparency to potential students, but it runs into a Prisoner's Dilemma, with poor outcome organizations opting not to participate.

The Department of Education should have a vested interest specifically in the way that you mention, and they did set up a site that communicates historical outcomes of majors at a per school level at https://collegescorecard.ed.gov/, but it gets little visibility in the college marketing funnel that is filled with for profit enterprises like US News and Niche-- plus the marketing (admissions and/or athletics) departments of colleges themselves.

You can't just hike tuition unless the government is pumping out 100% loans. This is crazy.

Yep, Additionally we could also push for tuition-free community colleges to reduce the need for for-profit colleges in the first place.

That's a great idea as long as we're not subsidizing activist disciplines such as gender studies. I'd be happy for my tax money to be going towards free computer science courses at a community college.

Agreed. Any proposed solution to the student debt crisis that doesn't hold schools accountable is not a solution at all.

I agree but I think the government should set a max on the amount they will guarantee. The colleges are smart and will set tuition at the max guarantee because they don't want risk. They can cut social programs and stop building Taj Mahal dorms to get the price back in line.

Won’t that solution make it harder for students from economically disadvantaged backgrounds to get loans? Or is the idea here that universities would be prohibited from applying risk management to their loan portfolio?

Most economically disadvantaged people don't even know they can get a loan. I used to assume everyone knew about government college loans. Most do not.

We should aggressively target universities who commit this type of fraud and seize their assets, buildings, real estate, donations and endowments to recoup the taxpayers money.

Where is the fraud? I acknowledge the unethical behavior, but that's distinct from fraud.

Underwriting loans which the borrower has no ability to repay is fraud.

It's a confidence game being played on 17 year old kids who don't know any better. I agree it's a grey area and the fraud label may not fit, but it's fairly close to the truth.

The Confidence Game that the US government is playing on 17 olds. It's not the universities that are giving people loans to walk into a casino.

Perhaps we shouldn't seize the assets of random voters who enacted these programs

Your proposal pretty much already exists (although at the 10/90 split level). If your program doesn't have 10% covered by non us government loans in any year you can lose eligibility for any us government loans going forward. It's happened before, in fact I think that is what forced DeVry to shut down.

A better solution is for the universities to completely absorb the loss and never receive the remainder of the loan instead of it being on taxpayers' shoulders. This way at least they'll think twice before offering worthless degrees for hundreds of thousands of dollars.

Change it to 50% cover that must be paid via claw-backs from Administrative bloat salaries/bonuses, and it would make sense.

It's the EXACT SAME financial disconnect between risk and reward that cause the 2008 crash. AKA Moral Hazard.

Based on my understanding of PSLF, that's a feature not a bug

US Government gets paid back also through tax revenues on the salaries of the school, salaries of studends, expenditures of the schools to US based companies, etc.

It might still be favorable for the US Tax Payer even if these loans end up un-paid.

I don't know what colleges you're looking at, but you're misguided if you think colleges spend 100% of the tuition they receive. Schools like Harvard, Yale, Duke, etc. have multi-billion dollar endowments that just keep growing. Many colleges have so much money coming in and are forced to spend to keep their non-profit status that they build opulent dorm rooms, buildings they don't need, and have more Vice Provosts than banks have Vice Presidents. My own alma mater has TWO art museums on campus!

Most universities I'm familiar with spend 100% of their tuition on operations and some amount over that from endowment income. While they do have endowments, those are restricted and cannot be used for anything except their contractually agreed to purpose (scholarships, faculty lines, research for xyz thing, etc.).

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