"Last month, the US Department of Justice filed a massive lawsuit against the company behind the schools, Education Management Corporation, accusing it of fraudulently collecting $11 billion in government aid by recruiting low-income students for the purpose of collecting student aid money. Whistleblowers claim that students graduate loaded with debt and without the means to pay off the loans, which are then paid for with taxpayer dollars."
Are government guaranteed loans simply a bad idea for student loans? Seems like schools will simply charge as much as the government will guarantee. Why wouldn't they? It's free money!
In the USA that missing budget shortfall that states do not fund for a college is made up by the college raising their prices to students. Considering most state's income taxes are lower than the fed gov's the Fed must have skin in the game by funding ,more of that budget shortfall directly rather than the edu loan charades.
Up until a few years ago only government education loans were exempt from bankruptcy. I assume private education loans were added to encourage loans... I wonder if the tradeoff was worth it, going by the numbers.
Though in all fairness I say this as someone about to default later today (Saturday) to Sallie Mae because I can't come up with the required amount by noon. Of course, having my wages garnished likely means AES will follow. Yay.
I agree that the current educational debt levels present sustainability problems... but trying to compare apples to oranges only leads to worse public policy than we already have.
This would obviously only exacerbate the problem and hasten the fall, but that does appear to be how independent actors work.
The skin in the game effective tells a mortgage originator that if one loan in five goes bad they lose all their revenue(!) but the same message to universities would be that if one loan in five goes bad they have to raise their prices by 2% to compensate.
Fixing Student Loans: Let’s Give Colleges Some ‘Skin in the Game’
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