Opinion: A Small Proposal For Student Loans

"I am going to leave real estate for one post and comment on an issue that faces my own business: student loans," Richard Green writes in a Forbes opinion piece.

"I am sympathetic to Senator Elizabeth Warren’s crusade to narrow the very high spread between student loan costs and Treasury Securities.  But while I very much admire Senator Warren’s instincts and courage, I am not always crazy about how she does math. …

Pricing loans differentially based on the default performance of students at different colleges would give administrators a strong incentive to make sure their students did not default–that is, that they graduate and are marketable.  For low default schools, the ability for their students to pay low interest rates (which could be even lower in the event of risk pricing) on their loans would be a strong marketing points.  The government could also require universities to disclose on their home pages the true cost of attendance.

What about access?  To me, there is powerful evidence that higher education helps not only the person gaining that education, but society as a whole, and should therefore be subsidized (and yes, it is in my interest to say so–that doesn’t mean that it is wrong).  To that I answer that  review of the data show that there are public colleges and universities at all degree levels with lower than average default rates.  To the extent students are currently given 'access' to schools with high rates of default, they are not really being given access to strong educational opportunities at all.  Let’s think about using prices to steer students to places that will do right by them."

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