Well.. the problem is how can lenders "be careful" when loaning to an 18 year old, which we can call an adult all we want but an 18 year old on their way to college is basically a grown child with no money.

So how can a lender protect themselves? Make a parent with enough money co-sign? Then you are essentially systematically not giving loans to poor people.. and only giving "loans" to kids with parents who have money.

Anyway I do think it's a complicated problem.. we want to be able to give loans to basically anyone so they can go to school; but if they are loaning to people who by definition have no assets how can a lender protect itself without essentially discriminating against the poor?

I think it is not that complicated. In any case, there should be risk management involved. If you have a parent with enough money, make them co-sign.

If you come from a not so wealthy background, then you only get a loan for a program that has a higher earnings potential than what you put in. I mean come on, Williams College, the supposedly best liberal arts school in the country has a "median" graduating salary of 58k, and this number does not include the possibility that you could graduate with a major no one wants to hire. 1 year of cost of just tuition and room and boarding is 74k. This does not include other costs like health insurance, books, and other equipment, extra living costs. You add this up, you can easily run up the bill to 400k. You seriously think a person should be able to get this loan to graduate in "Arabic Studies"? I mean I am sorry that people come from a poor background (me included), but taking out that 400k loan without any checks and balances seems irresponsible.

Well, I think part of the solution is to require schools to provide an option for payments to be a fixed percentage of wages after graduation for a set number of years. Everyone's interests are then aligned, and the school now has to bear some of the risks, and also gains some potential upside if their students regularly command high wages. It's obviously not that simple, but schools like Purdue (Back a Boiler) have working systems in place.

Right, it's a weird situation, where lenders don't want someone going into bankruptcy right out of college when they have nothing to lose. But preventing loans from being discharged in bankruptchy has created the perverse dynamic where it's made the cost of college very inelastic and almost predatory.

Also, the best thing (for banks) is that since the borrower can't discharge the loans in bankruptcy, the banks have the borrower's entire working life to garnish wages and levy penalties.

This is remarkably similar to the subprime bubble (in part instigated by a federal policy to encourage homeownership).

It's amazing how few people recognize this. Unintended consequences of government policy in both cases. "Everyone deserves a home" said GW back in the early 2000s. We've now seen the exact same thing play out in the education system. Of course as soon as the government gets in the business of providing/guaranteeing loans, the cost of tuition skyrockets. Why wouldn't they raise prices?