If you make student loans dischargeable and private, wouldn't lenders would tighten up and only give loans to people with good odds of repaying the loans? IE, people from middle class+ could still get loans, but how about the smart kid from a very poor family? Wouldn't they be too risky to give a massive loan to?
There might need to be some regulations made so that lenders should discount family background, but only consider grades/earnings potential/etc.
But on the plus side, this should theoretically bring tuition costs down as there won't be effectively unlimited capital for tuition. It also encourages potential students to consider more carefully whether getting a degree makes sense.
Perhaps Pell Grants should also be expanded in eligibility (to make it so that more poor, but motivated kids can get access to higher education).
The goal of these changes would be to:
- Reduce the market distortions that are created by giving out federally backed student loans (reducing or at the minimum slowing the pace of growth of tuition costs)
- Reduce the burden on taxpayers by eliminating public student loans
- Makes it so that kids don't get stuck with student loans that are a drag on them for life, at worst, they'll have to deal with bankruptcy
Potential downsides:
- Reduces number of people studying potentially useful/valuable to society degrees that don't have much expected monetary return
- Potentially reduces average level of education in the population (could be untrue if it also sufficiently reduces tuition costs)
