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<p>To get away from individual student variability the thing to do obviously, would be to bundle loans into a bond fund and sell each investor a part of the aggregated fund and assign an investment grade to each tranche. We could then have a regulatory body backstop the overall funds in exchange for things like providing a useful public policy service like extending the preferential borrowing to underrepresented groups.</p>
<p>I’d also worry about the problems of a Keiretsu effect- times get bad and employment slows. That endangers the alums income repayment stream at a time when a bad economy is undermining their own finances. They put pressure on their own organizations to hire as many of the borrowers as possible to protect their own finances. This might be counter productive to the company- not hiring the best people and hiring more than needed.</p>