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Comment by adventured | Hacker News Reader

Guaranteed loans means students can borrow almost as much as they care to (how else does one borrow $60,000 without the prospect for a job, in a disastrous economy), and accordingly universities can perpetually raise prices as they know the Feds will just keep guaranteeing the loans via Mr Printing Press. It's quite a simple equation in fact.

If you wanted to solve the education cost spiral, the Feds need merely begin reducing the guaranteed funds, stop guaranteeing loans, or strictly lock down the guaranteed loan sums. Colleges would be forced to adjust to that new reality, in which they don't get perpetually increasing tuitions.

And if you want to check the concept, look up how much of a college education is subsidized by government loans today, versus 30 or 40 years ago - personally I think the general answer is obvious.

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Don't condescend. The logic you've spelled out above is far from an obvious conclusion - and even if it were, we make decisions on good data, not just how much a reasoning makes you nod.

> "And if you want to check the concept, look up how much of a college education is subsidized by government loans today, versus 30 or 40 years ago"

Graph the price of gold vs. number of sea pirates in the world and you'll also get a correlation. The explosion of loans is highly correlated with rising tuition - the citation part needed is the causal link.

I wasn't trying to be condescending, so I adjusted my response. I think the link is obvious, you don't.

I think that anytime the Feds provide blanket guarantees for loans that can easily be taken advantage of by tens of millions of people, you tend to get substantial price inflation. Particularly when there are no checks on the loans that connect to the real economy.

The Stafford loan program is capped at just over $30,000. Direct PLUS loans have larger amounts, but can only be made to employed parents with good credit scores, not to students.

If you see a student with $60,000 in debt, thank the glorious free market. A good chunk of that was lent by a private financial institution.

An alternate way is to let people declare bankruptcy to get out of student debt.

I agree schools only let students get $100,000 into debt because someone will lend the money. However, if the markets for loaning money to students dried up, schools would finally face some price pressures.

Maybe I just don't understand the drawbacks, but why wouldn't a student then immediately declare bankruptcy after college? They likely have no assets, etc.

If the student only has (say) $3000 worth of debt, then the student would be stupid to have a bankruptcy on their credit report.

But if they had more than (say) $20,000 in debt, that is exactly what they would do.

Therefore, no school would let a student get significantly in debt.

Therefore, the school would have to lower prices.

The fear back in the day was that, without some way of holding students to loans, that the students wouldn't be able to get credit, and college would become a rich person's paradise.

I can understand where they were coming from when they were thinking that, but what we've actually gotten seems a much worse disaster than the one they were trying to avoid.

As a dependent student, I couldn't get anyone to loan me $60,000. :( As a freshman at 18, they'd only offer me something like $4500 in student loans, and I ended up not being able to go since I had no access to enough money to cover a $20,000/year in state public school. As an independent student, the most I can get is something like 13K in federal loans (and maybe a 5K pell grant). I can't get anyone to give me a private loan since I have no collateral, even though I have good credit.

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