Obama administration ended this in 2010:
The problem that remained, of course, is the federal government itself lends students a blank check as long as the check is deposited at an “accredited” university.
The compound interest working against students is a major part of the predation in these loans.
But banks need to make money? Have a one-time interest tacked onto the total loan amount that doesn’t change over time.
This incentivize banks to not loan out as much to just about anyone, and thereby forcing schools to spend less on frivolous staffing and social issues/needless expansion.
Then, slowly reduce the federal student loan amounts to some arbitrarily low amount, something enough for someone on the median salary to comfortably pay back if they went to a state school.
Blue collar jobs are in desperate need of apprenticeships. And there’s good money to be made. But it is legit hard, physical work. And work that needs to get more respect, because without it, water doesn’t run, lights don’t turn on, roads crumble, and buildings aren’t built.
> If you just took away the guarantee on the loans, and made them dischargable in bankruptcy, colleges would be forced to compete on price again
You'd also see many people couldn't afford college because they wouldn't be approved for the loan without the federal guarantee. I feel like the solution is universal education, we dance around it because it's not politically feasible but it's the solution. Set some rules around who can attend (grades, testing, etc). Setting reimbursement rates will control costs (like Medicare does). Force the universities to collect from the government (like hospitals do). Force 'quality control'/compliance on education standards (also expected of hospitals).
I've heard this thousands and thousands of times. I suspect that most people have heard it already too.
> It means there's pretty much no downside to banks loaning an arbitrarily large amount, because if the student doesn't pay it back, the government will.
This is a misunderstanding of the current student loan system, which is mostly direct loans from the federal government rather than private bank loans. That's why student loan forgiveness by the federal government is a current issue.
If you provide funding (loans or cash) that is earmarked, then it serves as a price floor and upward cost pressure on that thing.
Let’s just give everybody $20k per year between ages 18-22, with no strings.