Anya Kamenetz touched a national nerve when she authored Generation Debt shortly after graduating from Yale. She's a speaker in great demand on U.S.campuses, and she's authored another book that probes the future of U.S. higher education. Here she speaks clearly about present-day student loans.
Is it good social policy to loan money to 18-year-olds for any reason?
The logic behind student loans made sense originally. But in the present architecture there is not enough responsibility being taken by college financial aid officers, students, families and lenders to determine appropriate loan amounts for appropriate reasons. I don't think student loans should be banned altogether. But I believe they should be regulated more strongly than they are now.
Is it good business to loan money to 18-year-olds for college?
The federal guarantees and prohibition of bankruptcy have shifted the risk from the businessman to the taxpayer. That makes it good business for lenders, but not the taxpayer. I am an advocate of allowing student loans to be discharged in bankruptcy like any other debt. Meanwhile, a traditional four-year college is not for everyone these days. It might also be a good idea to foster participation in business, the arts, social entrepreneurship.
Does the fact that the government is doing the lending make it any wiser?
No.
Does a good business solution suggest itself to you?
Restoring bankruptcy protecton will be a good start. Removing or reducing the federal government guarantee would be a good next step. The normal workings of the marketplace would then restrict tuition prices.
Who would benefit?
Students and their families would benefit. Higher education institutions that are able to innovate and offer desirable programs at a good value will also benefit.
Who would pay?
The same payers ... students, families, states, and philanthropists.