<p>
[quote]
If universities are confident enough that the value of their product is sufficient to justify the associated financing cost, then they should get into the lending business themselves, in the same way that automobile manufacturers set up finance companies to help consumers buy their products. But the universities are not eager to get into that business, suggesting that they know that there is in fact a disconnect between price and value in the higher-education market.
<p>I’m sure that if Us want to do this, they will have some students and families who are interested. Not sure how many want to bother, as they have more applicants than they can accept now, for many Us.</p>
<p>I have no problem with getting the government completely out of the business of lending money. If you privatize student loans, they will be harder to obtain (assuming that you also make the loans dischargeable in bankruptcy) because creditworthiness and future likelihood that the loan can be repaid will be factors. The interest rate will also approximate the loan you could get today on an unsecured twenty year loan from a bank (not 3.4%!). Now this will cause a lot of colleges to fail, but the cost of education would not continue to rise exponentially above the cost of living and would probably begin to drop without the government support. There would probably be a significant rise in the number of CCs around the country and most students who wanted to go to college would have to live at home. As long as money is “cheap”, students (and their parents) will borrow more than they should for a college degree and colleges will continue to raise their prices to meet the “demand”.</p>
<p>I think this would also make schools more cautious as lenders and more selective about whom they are extending how much money to. Never did like the govt handing out money for any and all takers, for undeclared or other, borrowing obscene amounts at paltry interest with very generous terms and no credit history or collateral.</p>
<p>Actually, the federal govt DID subsidize buying new cars in their cash for clunkers program and now in the rebates for electric vehicles, but actual loans, no.</p>
A lender can repossess a car if the loan’s not paid back, actually if only a couple of payments are missed, that can’t be done on a student loan. There’s no point in trying to compare the two types of loans since they’re vastly different circumstances.</p>
<p>Until recently, student loans WERE “private,” in the sense that private lenders lent the money, although it was guaranteed by the feds. There were issues with that system, and students got the short end of the stick at times. Direct lending protects students.</p>
<p>Access to a limited amount of guaranteed federal loan funding is important for many, many U.S. students to be able to afford school.</p>
<p>Maybe. But ‘easy money’ has always caused problems in the past and will continue to in the future. Federal Guaranteed should stick to the 27k limit, total, to cover basic living expenses. The rest should be privatized as they horribly distort the market and cause this rampant tuition inflation.</p>
<p>Google the 5C’s of Credit. The housing bubble of 2007 ignored all of these, yet we’re fine with student loans doing the exact same thing. Then we have politicians setting an interest rate (Elizabeth Warren wanting 75bps because ‘thats what banks borrow for’ ignoring the fact that its an overnight rate and actually a penalty rate) so its just another complete meltdown in the making.</p>
<p>I get that “easy money” is a problem. However, the federal loan maximums are not ridiculous, and they can be considered an investment in the future. Those who do not borrow private loans on top of the federal loans should be able to afford the repayment … particularly with the various repayment plans available for federal loans.</p>
<p>Tuition has gone up because the taxpayers have reduced the public funding for colleges. Higher loans are a symptom, not the cause. If taxpayers restore the public subsidies to the colleges, then tuition can be controlled and borrowing will be less necessary.</p>
<p>I disagree the maximums are not ridiculous:</p>
<p>The grad school uncollateralized loan is 138.5k. An independent student (one whose parent fails the minimal credit check for the Parent Plus) can get up to 57k for undergrad. 57k is over 1.25 years gross earnings for almost every college graduate. </p>
<p>Coupling this with the number of people who dont even graduate and still have these loans, I think its fairly evident that easy money really is the problem. No one should be able to lever themselves up like this, especially since the people without a credit worthy parental support system are the most likely to not complete their degree.</p>
<p>The repayment plans are addressing the issue on the backend. </p>
<p>The simple fact of the matter is this is a huge subsidy to universities and is out of control. Without this easy money, people would have to think much harder about signing up for tuition bills. Its the same as housing except they admit the ease of credit for housing is purposefully driving up costs- I’m still not sure as to why higher home prices are a good thing except for local municipality revenues.</p>
<p>Then why have private colleges gone up at the same rate? This just simply isn’t true, most businesses cut expenses when they lose revenue. I’d love to see college budgets do the same.</p>
<p>Spending per student at public colleges has stayed fairly flat in real dollars. As public funding has decreased, the colleges have raised tuition to make up the difference. It’s much more difficult to reduce spending per student, it’s easier to just raise the tuition.</p>
<p>I’d love to see the facts behind your figures.</p>
<p>In any case, thats not an excuse to raise tuition. Without the availabilty of credit, demand wouldn’t be artifically inflated to support these tuition levels.</p>
<p>And you didn’t address private colleges at all.</p>
<p>Where are YOUR facts to support your opinion that the availability of guaranteed loans has led to higher tuition costs? </p>
<p>I work at a private college. We have a small staff, each of whom wears many hats. We have tons of responsibility and earn a lot less than we would in industry. We worry about tuition increases, because we know that we lose students when we increase tuition. We have to run programs, maintain facilities, pay employees, etc, etc.</p>