Archive for April 4th, 2019

Should colleges be forced to underwrite student loans?

April 4, 2019

Sounds like a logical, easy fix, right?
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Yesterday, we posted about the $1.5 trillion in outstanding student loan debt held by about 45 million former students.

We argued that that’s a problem because (1) The student loans fuel tuition increases by enabling colleges to fund inefficiencies (2) Servicing the debt load constrains borrowers lifestyle choices (e.g. marriage, home buying) by crowding out other debt capacity, and (3) When interest rates rise (and, they eventually will) repayment will pose an increasingly difficult challenge for many (most?) borrowers.

Following on that last point,  the default rate on student loans is about already 20% on average … with big differences by the type of school the borrower attended.

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What explains the differences?

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